Question

John is expecting to get paid $20 this period and $30 next period. The interest rate...

John is expecting to get paid $20 this period and $30 next period. The interest rate is 5%. He will consume C1 today and C2 tomorrow. Solve for C1* and C2* for the following:

a) U(C1,C2) = C11/2C21/2

b) U(C1,C2) = C11/4C23/4

c) U(C1,C2) = MIN {C1C2}

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