Fifi is looking to insure her cat toys against flooding. Her utility function on the value of her assets is given by u(w) = w^1/3 , where w is the value of the assets. Her toys have a market value of w = 125 when dry. In the event that a flood occurs, they will have a market value of w = 0. Assume that information is symmetric in this market. (Note that Fifi is very very risk-averse in this example.)

Suppose that the probability of a flood is p = 0.3. What is Fifi's certainty equivalent? What is her risk premium?