Consider a single consumption good and two states of nature {a, b}. An investor has preferences and a (random) endowment of this commodity as follows: u (x(a), x(b)) = logx(a) + logx(b), (e(a), e(b)) = (0, 2) In order to hedge against risk this investor can trade two securities with returns trading at a price q = 3 per (), denominated in units of the commodity: r = unit and r2 = (2), trading at a price 92 Find the optimal consumption plan of this investor and answer: If instead of asset markets this investor faced contingent markets, for what (rela- tive) contingent market prices would this investor choose THE SAME optimal p(b) consumption plan? = = 4 per unit. Answer: