SHOW WORK for parts c, d and e

Sung has the following utility function over money: each month, if he has $r, his utility is u (I) = 1. Assume his job pays him a monthly income, I, and his mother supplements his income by giving him an additional M. Since he wastes so much time on the internet at work, he knows that he will be fired with probability p (and will stop earning his work income). etc (c) Suppose Sung could buy unemployment insurance. Find the highest price, C, at which Sung is willing to buy unemployment insurance. (The insurance is such that, if he loses his job, the insurance company will pay him I). Simplify your answer as far as possible. (It will be messy-I am interested in whether you are setting things up correctly, not the details of your final answer) (d) What is Sung's risk premium, R? Simplify as far as possible. (e) Show that if Sung is certain to lose his job, or if he is certain to keep his job, then his risk premium is 0. Interpret briefly. Sung has the following utility function over money: each month, if he has $r, his utility is u (I) = 1. Assume his job pays him a monthly income, I, and his mother supplements his income by giving him an additional M. Since he wastes so much time on the internet at work, he knows that he will be fired with probability p (and will stop earning his work income). etc (c) Suppose Sung could buy unemployment insurance. Find the highest price, C, at which Sung is willing to buy unemployment insurance. (The insurance is such that, if he loses his job, the insurance company will pay him I). Simplify your answer as far as possible. (It will be messy-I am interested in whether you are setting things up correctly, not the details of your final answer) (d) What is Sung's risk premium, R? Simplify as far as possible. (e) Show that if Sung is certain to lose his job, or if he is certain to keep his job, then his risk premium is 0. Interpret briefly