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A bond that matures in one year has a payoff of either 0 or 100 dollars with equal probability, xt+1 = { 100 0 .

A bond that matures in one year has a payoff of either 0 or 100 dollars with equal probability, xt+1 = { 100 0 . Find the price that an investor with power utility of consumption and an annual income of I = 100 would be willing to pay today for this bond given: a. An annual discount factor = 1 and a risk aversion parameter = 2 (2 points) b. An annual discount factor = 0.9 and a risk aversion parameter = 2 (2 points)

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