In this problem we got an investor that focuses on strictly risk averse junk bonds with a utility function for wealth (x) in the form U(x)=ln(x), and has invested 2 million dollars in highly risky junk bonds.

In this problem we also assume that there is a 70 percent probability that this bond portfolio will increase in value by 10 percent during the next two weeks and a 30 percent probability that it will decrease in value by 40 percent.

1) Find the objective risk neutral value of this junk bond portfolio

2) Find the subjective certainty equivalent value of this portfolio to the junk bond investor

3) Find the risk premium for this portfolio

4) Is it possible that a wealthy second investor with a utility function U(x)=x^1/3 would be potentially willing to purchase this portfolio from its current owner?