For Q2 (b) Assume $Y = $1,000,000, gamma = 3, pi% = 0.01%, $L = -$800,000

2) Answer both questions (3) Calculate the coefficient of absolute risk aversion for the following utility functions with positive wealth, W, and put appropriate restrictions on the parameters, a, b, and c. i) Quadratic: U(W)=aW9W2 0 ii) Negative Exponential: U (W) = a be'cw (b) Suppose that a consumer's utility function is 1-? u(v) = Y 1-? Assume that the consumer's home is worth $Y (current wealth) and that the consumer's coefficient of relative risk aversion is y. How much would the consumer pay for fire insurance if the probability of the fire is pi% and the expected loss is_$L? If there is no fire the expected loss is $0. Use values for