1. Asset. Pricing with CRRA Utility Suppcec that infinitely many identical bouacholds live for two periods. Back home wed is endured with yo in pond 0 al maxives a rankin inDone in anria 1. y1 = (y,,3,) what y, > yo and I counts The probability of good acate occuring and 1 -a denotes that of & bad state. Suppose alan that way are stale coulingual chums availalde i" perusal 0 fir ledh sales, frank dab prix: q, bud qu. which the bowsand will tok as given. Asme that there dors nut exist are anestate- household has the following utility function: cl-o U ( Co , C . C ) = 1 - 0 1 - 0 + (1 1 - al Denoting x, as the member of state contingent cakns bought in period U, for cate s, act up the maximize:'s problem I'm the representative household (Hint: Sure there are un bonds, we need a budget constraint for each period and each state. i.e wen should have a constrains in talalj. it) Slow be maran evaring curditions of fig country id) Derive q, whore s is citdar g or b as a function of the erogenous variables of this model. {yo, y,, yof , n } is) How i qs all:cial by therevenue, cuiliu. yo,y,,y.8 , *? Explain inlui reply. ill How are We page a fueled by o? What does this ae chee. We nairn e an ass. as g timerinn of risk aversion? ") ITthere was a risk free hand, what would he the risk free interest rate! How does it depend on o? Explain in aitively