Risk and Insurance Activity:

Kelly is a farmer with zero wealth. She can either plant rice or cotton. If she plants cotton, Kelly earns an income of $1600 if the weather is GOOD, and $0 if the weather is BAD. If she plants rice, Kelly will have an income of $900 under both GOOD and BAD weather. The probability of GOOD weather is 0.7. The probability of BAD weather is 0.3. Kelly's utility function is ()=3*sqrt(c), and c is the value of consumption. Follow these informations to answer the following questions.

Kelly:

1. What is theExpected Value of Consumptioninplant riceandplant cotton?
2. What is theExpected Utilityinplant riceandplant cotton?
3. What is theCertainty Equivalent of consumptioninplant riceandplant cotton?
4. What is theRisk Premium in plant riceandplant cotton?