You live 2 periods. You are born with nothing and you must die with nothing. In period 1 you have labor income of Li1. In period 2 you have labor income of Li2 You may consume (C1 and C2) as well as buy or sell bonds (B). Assume Labor of L1 = 20 & L2 = 220. The interest rate is 10%. Finally assume people want to smooth consumption so C1= C2. How much do people consume in each period?

1. How much do people consume in each period?

2. What is the value of B?