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Question 1 a. Analyse the following utility function: 𝑈ሺ𝐴ሻ ൌ െ𝐴ି଴.ହ i. Is marginal utility increasing, constant or decreasing? (1 mark) ii. What is the function’s absolute risk aversion (ARA)? Define ARA. (4 marks) iii. What is the function’s relative risk aversion (RRA)? Define RRA. (4 marks) iv. Is this a function of a risk-averse investor? (2 marks) b. Why are the indifference curves of risk-averse investors not linear? (4 marks) c. Compare the indifference curves of more and less risk averse investors. Explain why they are different. (5 marks) d. Why do risk averse investors refuse to accept the ‘fair bet’? (5 marks)