VII.1. An individual's risk premium for the lottery I = (x, p), that pays x = (0, 4, 16) with probabilities p = (1, 2, 1), is RP(1) = 2. Hence his certainty equivalent is O CE(1) = 2 O CE(1) = 1 O CE(1) = 3 X CE(1) = 4. VII.2. If the certainty equivalent of a lottery , which pays 20 thousand euros or 10 thousand euros with the same probability, is 14 thousand euros, then the individual O is risk loving is risk neutral is risk averse O has an indeterminate risk attitude. VII.3. If an individual's certainty equivalent of lottery ( = (0, 2, 10; 3, }, 10 ' 2 1 5 ) is CE(1) = 2, then his risk premium is O RP(1) = -1 0 RP(1) = 1 O RP(1) = 2 0 RP(1) = 0. VII.4. The risk premium of the lottery / = (0, 8; 1, 3) for an individual A whose preferences are represented by the Bernoulli utility function uA(x) is RPA(!) = 2. If the preferences of an individual B are represented by the Bernoulli utility function UB(2) = 3UA(x), then her certainty equivalent of the lottery l is: OCEB(1) =2 CEB(1) = 6 X CEB(1) = 4 0 CEB(1) = 0. VII.5. Identify the certainty equivalent and risk premium of the lottery l = (x, p) that pays x = (0, 2, 4) with probabilities p = (1, 2, 1 , 4, 1) for an individual with preferences represented by the Bernoulli utility function u(x) = x2. O CE(1) = 2, RP(1) = V6 -2 0CE(1) = 2, RP(1) = 2 - V6 X CE(l) = V6, RP(1) = 2 - V6 OCE(1) = V6, RP(1) = V6 - 2. VII.6. A consumer preferences over lotteries are represented by the Bernoulli utility function u(x) = vx. Identify the expected utility and certainty equivalent of the lottery l = (x, p) that pays x = (0, 4,9) with probabilities p = (6, ;, ;) Eu(l) = 1, CE(1) = 1 0 Eu(l) = 4, CE(1) = 2 O Eu(l) = 2, CE(1) = 2 X Eu(l) = 2, CE(1) = 4