see attached

Q4. (Risk and Impatience) It is observed that savings rates in developing countries tend to be lower than saving rates in developed countries. One ex planation for this comes from the fact that people in developing countries on average face higher uncertainty in their lives, for instance, due to an underdevel oped market for unemployment insurance or health insurance. In this problem you are asked to show that the degree of risk one faces reects in the degree of patience one exhibits in her choices. Suppose there are only two periods 0 and 1, and a DU agent with discount factor 0 . (ii)3Suppose now that she faces some uncertainty with respect to period 1: if she saves the $100, then with probability % she will receive $150 in period 1 and with probability % she will receive 0. There is no uncertainty in period 0. Assuming that she evaluates the uncertainty using Expected Utility theory, show that she will not save even if she is perfectly patient, 6 = 1