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Problem 1 (25 points) Suppose Elsa lives for two periods. Her preferences are represented as follows: Mama) = JE+ awe2 where c; is today's consumption level and c2 is tomorrow's consumption level. Suppose Elsa's income today is y1 = 100 and her income tomorrow is my = 2130. Interest rate is denoted by r. 1. (5 points) Is Elsa risk averse, risk neutral or risk loving? 2. (10 points) Write down Else's optimization problem including the budget set. 3. (10 points) Determine Elsa's optimal consumption bundle (cf, 05) as a function of r