MRS 0.1VGNE 0.9VCF To find his optimal bundle of contingent consump- tions, you must set the marginal rate of substitution equal to the slope of budget constraint Solving this equation, you find that Willy will choose to consume the two contingent consumptions in the ratio (e) Since you know the ratio in which he will consume OF and CNF, and you know his budget equation, you can solve for his optimal consumption bun- dle, which is (CF, CNF) = . Willy will buy an insurance policy that will pay him if there is a flood. The amount of insurance premium that he will have to pay is