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Unformatted text preview: w e G (3 . 1945) The maximum premium is found by equating E [ u ( wX )] = E [ u ( wGX 5 )] which leads to. 099995 =ew e G (3 . 1945) G = 3267 . 97 2 4. (6 marks) (a) Note that u ( x ) = x and u 00 ( x ) =x1 . u ( x ) > 0 and u 00 ( x ) < 0 for x > imply that > 0 and 6 = 1. (b) If Y N ( , 2 ), then m.g.f. M Y ( t ) = E[ e tY ] = e t + 1 2 2 t 2 . u ( CE ) = E[ u ( X )] CE 1 1 = E " X 1 1 # CE 1 = E[ X 1 ] = E[ e (1 ) ln X ] = exp (1 ) + 1 2 2 (1 ) 2 CE = exp + 1 2 2 (1 ) 3...
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 Spring '10
 Tan,KenS

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