You have a net worth of $$996980$ and a utility function given by $u(w)=w^{0\mathrm{.}5}.$ If your

house catches fire, a $2\%$ likelihood of occurring, you expect it to be total loss and it

was recently assessed at $$508636.$ What is the risk premium $($$$)$ you'd be willing to

pay for full coverage against this fire risk?

Hints: Compute the certainty equivalent $($CEQ$)$ as you did in Comm $220$ and recall

that the risk premia is the amount you'd be willing to pay over the expected loss

Answer: