2. There are two states. The probability of state 1 is m, and the probability of state 2 is 7r2, where 1r1 | 7r2 = 1. There is one risky asset. It pays out H in state 1 and L in state 2. There is also a safe asset, which pays out R in both states. Assume H > R > L. Both assets cost $1 per unit. (a) (b) Consider a consumer who maximizes expected utility. Suppose he has a total of $1 to spend. Write down his expected utility from buying A shares of the risky asset and 1 A shares of the safe asset. Assume that the consumer's utility function over money is concave down. Write down an equation that characterizes the optimal level of A. (Hint: take the derivative of your previous answer with respect to A, and set it to 0. You do not need to solve the resulting equation for A.) Write your equation so that you have a ratio of marginal utilities on one side, and a ratio of other parameters on the other side. That will make the next part easier. Show that A = 0 solves your equation from (b) when R equals the ex pected value of the risky asset. Provide a sentence or two of intuition for your