Problem 1 (10 points) For all the following questions, suppose that you are facing the following gamble: 1/3 probability of winning $25 and 2/3 probability of winning 54. Suppose, first, that Jon's utility function is u(x) = x/i a. (2 points) Compute the expected utility ofthe gamble. b. (2 points) Compute the certainty equivalent of the gamble. Suppose, next, that Stephen's utility function is u(x) = x2: c. (2 points) Compute the expected utility of the gamble. d. (2 points) Compute the certainty equivalent of the gamble. e. (2 points) Discuss ifJon or Stephen are risk averse or risk prone