Freddyleadsanexcitinglife.Hiswealthisariskyprospectthatwilltakethe value $990 with probability 0.4, or $210 with probability 0.6. His utility of wealth function is U = W0.45. Given this information, calculate:

1. (i)the level of wealth with certainty that would give Freddy the same utility as the risky prospect; and,
2. (ii)the cost of the risk associated with the risky prospect.