Consider an investor with an infinite horizon in a market with a constant risk-free return and a single risky asset with returns Rt = 1

ν

eμ+σ εt for a sequence of independent standard normals εt and a constant ν—as implied by (10.31) whenthe investor is a representative investor and consumption growth is IID lognormal. Assume it is optimalforthe investorto chooseπ = 1—as istrue when the investor is a representative investor. Show that the condition δB1−ρ < 1 used in Section 9.6 to ensure the existence of an optimum for the investor implies

ν < 1, as assumed in the Gordon growth model.