1. Let us solve a two period consumption investment decision similar to the one presented in the text. Assume that you have income equal to $20 in each of two periods. Furthermore, you have the ability to both lend and borrow money at a 10% rate. Draw the opportunity set and your indifference map. Show the optimum amount of consumption in each period.

2. Assume you can lend and borrow at 10% and have $5,000 in income in each of two periods. what is your opportunity set?

3.Assume you can lend and borrow at 5% and have $20,000 in income in each of two periods. Further assume you have current wealth of $50,000. What is your opportunity set?

4. An investor purchased 1,000 shares of stocks at $60 per share. When the investor sold the stocks after six months, the price was $65 per share. Assume that this investor could borrow $30,000 from the brokerage firm at 2% interest rate over the 6 months.

4-1. What is the return on this investment without the borrowing? $5,000

4-2. What is the margin rate of this investment after the borrowing $30,000?

4-3. What is the return on this investment with the margin?

4-4. What is the minimum price of this stock satisfying the maintenance margin of 30%?