ASAP PLEASE

Consider a contingent claim economy with two agents A and B. They live for two periods t = 0 and 1. At t = 0, the two agents are endowed with A0 = 6 and B0 = 5 units of apples. (These apples perish before date 1.) At t = 1, there are two possible states of the world. In state s, where s = 1,2, their endowments are As and Bs respectively. Let xAs (and xBs ) denote the consumption level in state s for agent A (and agent B). The two agents seek to maximize the following utility functions: UA(xA1 ,xB2 ) = lnxA1 + 4lnxA2 UB (xB1 ,xB2 ) = 4lnxB1 + lnxB2 At t = 0, agents trade contingent claims for date t = 1 consumption. Suppose A1 = 1,A2 = 5,B1 = 5 and B2 = 1. (a) (2 points) Explain what are traded at t = 0 and why agents may choose to trade them.

(f) (5 points) Derive the contingent claim economy equilibrium in this example. Hint: your results should be numbers, not functions of prices.