solve all parts

OR (B) Consider an individual with wealth M, facing one of the two possible states of nature, State-1 and State-2 with probabilities P and 1-L respectively. In State-l the individual suffers loss equal to L, which is less than M. The individual can purchase an insurance that will pay benefit equal to B in State-1 and zero in State-2. The cost of insurance is aB whether or not the loss occurs, where a is a constant. The state dependent utility function is U= n(X) for states-I and U=ln(x) for state-II, where X is wealth available after adjustment of loss, insurance benefit and insurance cost, etc. a) Find the value of T at which the expected net benefit from insurance is equal to zero, that is, the insurance is actuarially fair. b) Write down and explain the expected utility function of the individual and specify a criterion for the choice of insurance amount B that the individual would like to buy. c) Solve for the value of B using the criterion specified in part b assuming that 2 = 1. d) How would you modify your result in part (C) if i) 2 1? OR (B) Consider an individual with wealth M, facing one of the two possible states of nature, State-1 and State-2 with probabilities P and 1-L respectively. In State-l the individual suffers loss equal to L, which is less than M. The individual can purchase an insurance that will pay benefit equal to B in State-1 and zero in State-2. The cost of insurance is aB whether or not the loss occurs, where a is a constant. The state dependent utility function is U= n(X) for states-I and U=ln(x) for state-II, where X is wealth available after adjustment of loss, insurance benefit and insurance cost, etc. a) Find the value of T at which the expected net benefit from insurance is equal to zero, that is, the insurance is actuarially fair. b) Write down and explain the expected utility function of the individual and specify a criterion for the choice of insurance amount B that the individual would like to buy. c) Solve for the value of B using the criterion specified in part b assuming that 2 = 1. d) How would you modify your result in part (C) if i) 2 1