Problem set 7 Problem 1. a) Derive analytically a solution to the intertemporal utility maximization problem to obtain of and 03. maxu (c1, 02) = 0'ch 61,62 st. b) Show the solution graphically for two cases: i) when m1 is small and m2 is large and the agent is a borrower at t = 1 and ii) when m1 is large and m2 is small and the agent is a lender at t = 1. c) Assume that interest rate increases: Show how the graphical solution in b) will change in both cases. (1) Compute the savings 3 = m1 of. Analyze how the savings change with increase in 1\