It belongs to Financial Economics

14. 15. g Solve the following questions, and just type or write yo ur nal answer only. '3'? (You don't have to write out your calculation process and mathematical expressions.) (15 points] A consumer's consumption-utility function for a two-period horizon (t = 1, 2) is given by 43031.62) = 111(01} + [HICzl- The consumer's income stream is y1 = $1500 and yz = $1080, and the market rate of interest is 8%. Calculate the optimal values for (:1 and 62 that maximize the consumer's utility. [20 points) You have just graduated and need money to buy a new car. Your rich uncle Henry will lend you the money so long as you agree to pay him back within four years. and you offer to pay him the rate of interest that he would otherwise get by putting his money in a savings account. Based on your earnings and living expenses, you think you will be able to pay him $5,000 in one year, and then $8,000 each year for the next three years. If Henry would otherwise earn 6% per year on his savings. how much can you borrow from him