2 A Explain The Terms Risk Averse Risk Loving And Risk Neutral With The Aid Of Diagr 3345648

2. (a) Explain the terms risk averse, risk loving and risk neutral with the aid of diagrams. Jane’s utility (U) depends upon her income( Y) according to the following table U(Y) 50 7 100 9.5 150 200?? 14 250 300 350 12 16.5 17 19 She has received a prize with an uncertain value. In particular, with probability 0.25 she wins $300 and with probability 0.75 she wins $100. (b) What is the expected payoff from this prize? What is the expected utility from the prize? Is Jane risk averse, risk neutral or risk loving? Explain. (c) Using the information above, find the certainty equivalent income and the risk premium for this problem.

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