3. (40) Suppose that you are a consumer solving a two period optimization problem, and that there are two equally probable states of the world next period, representing low L or high # future consumption. Suppose that there are two stocks, each with zero dividend, whose prices at present and in each future state are given below. Price Stock A Stock B Current 2.1 1.5 State L State H 09 - (a) (10) Using the law of one price, find the stochastic discount factor M, in states L and H. (b) (10) Assume that you had log utility u(C) = logC and that your rate of time preference were o = 0.9. If your consumption today is Co = 120, use the stochastic discount factor to calculate your future consumption C, in states L and H. (c) (10) Suppose that you receive no endowment next period, so that all of your future income comes from the payoffs to your investments. How many shares { of each stock do you hold? (d) (10) Calculate what your initial wealth Ag must be