Questions in the picture

2. [30 points] Consider the an asset pricing model where the agent maximizes: U = Fo E Btu(c) =0 subject to: deat + qt + at 2 at + Pe (at+ 1 - at ) + pedi+1. Assume the utility function is u(ct) = where y = 2. Here, and are shares in a riskless asset that will pay 1 good next period. The Bellman's equation is: u(Ct) + BE. [V(St+1)] + V(St) = max { c, at+1,an+1} At dear tai - C - Pe (at+1 - at) - pear+1 where St = { at, at , dt, Pt, Pi } . (a) Find the two intertemporal Euler equations. (b) Write a matlab file that solves for {c, p, p/} given B = 0.96, y = 2, and d = 1. Assume that equilibrium supply implies at = 1 and a, = 1 for all t. (c) Find the steady state returns for the risky and safe assets