here is 10 questions, each one is connected to eachother.

January 2023. Leif Ove is a professional classical pianist with many recordings on his CV and frequently filling large concert halls all over the world. LO lives in Bergen. His wealth at the end of last year is about 20mn NOK. This year, his manager believes Leif Ove's income will consist of 4mn NOK in royalties from previous recordings and 6mn NOK from performances. Crucial for the performances is that LO does not damage his hands. His manager therefore advises him to take out a hand insurance just like Keith Richards of the Stones did! 1. What is LOs wealth at the end of this year if LO manages to carry out all planned performances? What is his wealth if he damages his hands and all performances need to be cancelled? LO has a von Neuman-Morgenstern utility function given by u(w) = w- 1 -p where w is end of year wealth and p is a positive parameter. 2. Is LO risk averse? Calculate LO's coefficient of absolute risk aversion as well as his coefficient of relative risk aversion. How does the coefficient of absolute risk aversion vary with LO's wealth?3. If LO has utility function u(w) = \"'1 p 1-9 d ' P. ' (= +;|m mnmm) between wealth in the no-damage state state and wealth in the damage state. , give the expression for his MRS Assume from now on that p = 3. Musician Insurance Ltd. (MIL), is one of the few companies specialising in hand insurance. It estimates that there is a 7r 2 5% probability that L0 damages at least one hand (falling on the icy pavement in Bergen in winter, a misstep on the staircase in a concert hall, etc). It offers LO insurance at the following terms: for each krone in compensation, the premium will amount to (1 + Mar NOK, where A is a loading factor of 100%. 4. Is it optimal for L0 to buy any hand insurance at all at the terms pro- posed by MIL? Explain your answer. If yes, how much insurance (amount of compensation in case of hand damage) will LO take out and what is the annual premium he'll have to pay?l 5. Suppose that competition on the market for musician insurance forces MIL to lower its loading factor to 40%. Does this affect your answers to the previous question? December 2033. L0 is no longer performing. He has had a good career, but a few years ago, he got arthritis in his joints ruling out performing and new recordings. L0 has also been unlucky with his nancial investments, and his wealth is reduced to Tmn NOK. However, he's expected to make amund 6mn NOK (2mn N OK) in the form of rOyalties if the sale of records goes well (goes bad). Bugge is also a Norwegian pianist, living in eastern Norway. Unlike Leif Ove, Bugge plays jazz music spiced with electronic effects and is followed by a 10yal public of Scandinavian jazz lovers. Also Bugge has retired from performing and recording. His wealth amounts to 6mn NOK, and annual rOyalties of 311111 N OK (Imn NOK) of the sale of his records goes well (poorly) Bugge is as bald as a cue ball. His baldness has made him bold as well: he does not worry about risk and only cares about this expected wealth. The only risk that L0 and B face is the sales of their records, which depends (only) on the public's taste for jazz as classical piano music. It turns out that with probability % classic piano music is the thing to listen to, while with probability % it's cool to listen to jazz. 6. For each musician, what is his nal wealth in the jazz state of the world (superscript J ) and in the classical state of the world (superscript C). And how large is their total wealth in each state of the world? 7. For each musician, what is his certainty equivalent wealth? 8. Draw an Edgeworth box with the origin for L0 in the lower left corner and that for B in the upper right corner. The length and height of the box are the total wealth levels in each state of the world. Draw in the initial endowment point of the two artists. Sketch the indifference curves of L0 and that of B through the initial endowment point. It turns out the companies like MIL do not insure against the risk of the public's taste. At the 2033 Christmas party of the Norwegian Association of Piano Musicians in Oslo, LO gets to talk to B over a glass of wine, com- plaining about MIL now letting him down, despite him paying MIL for years a juicy premium for the hand insurance. B puts his hand on LOs shoulder and proposes that he and LO share their risks. L0 agrees, they raise their glasses and decide to meet each other at the beginning of the new year to work out the details. 9. If B has all the bargaining power at the meeting, which point in the Edgeworth box will he propose to L0? What is the implicit premium that L0 pays to B and the compensation in case that public likes jazz most? 10. If LO has all the bargaining power, which agreement will B and LO strike