The C-CAPM model is based on the following equation MU(c1) =E[(1 +r)MU(c2)], , whereMUis the marginal utility as a function of consumption,is the subjective time preference between 0 and 1,ris the one-period real interest rate or return on an asset,cdenotes consumption in each period, andEdenotes expectation.

(a) Succinctly provide economic interpretations of this equation.