These problems cover a competitive insurance industry in which customers have private information bout their probability of loss. The problems will resemble Exercise 8.8 in the textbook. et N/ = ($100,000, $500,000) be a person's no insurance wealth bundle. The person has square root itility function: U(m) = m1/2. If the person is high risk her probability of loss is py = 0.20 and if the person is low risk her probability of loss is pr = 0.10. It is common knowledge 3/4 of the population re high risk types and 1/4 low risk. We will isolate the only candidate for a separating equilibrium. Let CL = (hu, do) be the insurance contract meant for the low-risk types and C# = (hi, dw) be the contract meant for the high-risk types. ) Determine CH = (hu, d#) neatly showing your work. Write out the two equations whose solution gives Cr = (hu, di), using the particulars of this problem. ) Part of the solution of the above two equations is he = $10,606.07. Calculate dr