Solution

ID: past-exam-of-the-mathematics-course-of-the-university-of-cambridge/2014/iii/paper-38/6/d/solution

Part (c) gives . Since , its integrated identity implies
for every finite . The cumulative consumption increases with , so the monotone convergence theorem yields
This is the infinite-horizon state-price budget constraint. No terminal-wealth convergence or vanishing assumption is needed for this inequality.

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