1. (15 marks] It is well known that there is no any spot market in the future [time 1] in a fractionless and complete security market economy. One student in ECON 4051 class claimed : \"That is too bad! I would have become much better off if there were any spot market at time 1 since I could trade with other agents again.\" Do you agree with the student? \"Thy or why not? In other words; at time 1: one state of nature would be revealed: and there would be no more uncertainty. Now, suppose spot market would open again at time 1. Are you going to trade with other again ? Is there any incentive to make you to trade again:J State your reasons clearly. 2. {25 marks 31 Consider an economy with two periods and three states of the world at time 1 and one perishable consumption good. Suppose there is an agent in this economy with endowment '3 2 (50361) 2 (0: 100 : 100 ,100 l and utility function 1 U [0,811,612J318) = 1n Cu + Ell-\"511 + in 912 + 111313}- [a) (5 marks} Find the ArrowDebreu security market structure X\"1 _D. [b] (5 marks ) Find a portfolio 9 replicating the agent's time 1 endowment 51 = (100 :100 ,100 l. (a) (5 marks ) Let the prices of the three AD securities be 0 = (01702\";3) >> 0. Find the agentis total nancial wealth at time [i and nd his feasible budget set. (d) [10 marks] Verify the lnada condition and nd the agent's optimal consumption bundle C. 3. (30 marks ] Consider an economy with two periods, 0, 1, and two states ofthe world at time 1 and one perishable consumption good. Suppose agent A has endowment (100:0,0) and utility function r l D {60,011,612}: 103 t]- + cal + Ellog (1" 11}+10g (1+ c12-1]- {a} [5 marks } Suppose that there is a spot market , but no any nancial market at time [1. i. Find agent A's feasible budget set Bia- ii. Find agent Ais optimal consumption bundle and his utility at this consumption bundle. Denote his utility U2" for this case . Please note that this is the case of 110 nancial market. (b) (10 marks ] Now . suppose that in addition to the spot market . there is one nancial l 0 ) security at time 0 with price 0.5. market for AD1 = (