Problem 2 Intertemporal Choice Gerald is a CEO in Brainies Consulting Inc. His income in the first year is $200 and in the second $200. Assume that the interest rate is r = 100%. (His time horizon is limited to these two years.) a Find PV and FV of Gerald's income. b) Show in the graph (C1, C2) Gerald's budget set. Mark PV and FV and the slope of his budget line. c) Explain what borrowing/lending strategy gives Gerald each of the two "ex- treme" consumption points. (how much does he borrow / lend in the first period, how much does he pay back/ receive in the second period?) d) Suppose his utility function is U(C1, C2) = In C1 + In C2 Find analytically Gerald's optimal choice and show it on the graph. Does the optimal consumption involve saving or borrowing? Find optimal savings S