(a) (20 points) Find the coefficient of absolute risk aversion A(w) for the following utility functions:
i. u(w) = log(w)
ii. u(w) = w(1− γ)/(1−γ ), γ ≤1
iii. u(w) = −(1/p)e−pw
iv. u(w) = a + bw + cw2, b > 0, c < 0
(b) (15 points) For each of the above find whether they are IARA, CARA
or DARA (show or explain why)?
(c) (10 points) For u(w) = w(1− γ)/(1−γ ), γ ≤1, if for person 1 γ=γ1 and for person 2 γ=γ2 such that γ1 > γ2 which person is more risk averse?
