Question: Take our standard sequence problem SP and consider the specific example of the consump- tion savings problem SP 1. The utility function is log and

 Take our standard sequence problem SP and consider the specific example

Take our standard sequence problem SP and consider the specific example of the consump- tion savings problem SP 1. The utility function is log and reads u(c) = log c. Assume w = D =0. 1. Write the problem as a Bellman Equation (BE). 2. Use the Bellman Equation approach (i.e. method of undetermined coefficients) to find a recursive solution to SP 1. 3. Argue carefully that you have indeed found the solution to the (BE). 4. Iterate on the value function: take an initial guess vo(a) = 0 and compute Tvo for n = {1, 2, 3}. Compare your result to the exact solution

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