Kathy earns $55,000 in the current period and will earn $60,000 in the future period. What is the maximum interest rate that would allow her to spend $105,000 in the current period? What is the minimum interest rate that would allow her to spend $120,500 in the future period?
Answer to relevant QuestionsSmith receives $100 of income this period and $100 next period. At an interest rate of 10 percent, he consumes all his current income in each period. He has a diminishing marginal rate of time preference between consumption ...Harry runs a small movie theater, whose customers all have identical tastes. Each customer’s reservation price for the movie is $5, and each customer’s demand curve for popcorn at his concession stand is given by Pc = 4 ...Suppose the messiness of apartments is measured on a scale from 0 to 100, with 0 the cleanest and 100 the messiest. Suppose also that the distribution of apartments by messiness is as shown in the diagram. That is, suppose ...Your current wealth level is M = 49 and you are forced to make the following wager: If a fair coin comes up heads, you get 15; you lose 13 if it comes up tails. Your utility function is U = √M.a. What is the expected value ...Suppose your utility function is given by U = 1M, where M is your total wealth. If M has an initial value of 16, will you accept the gamble in the preceding problem?
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