Assume the 2-period perfect certainty model. The market rate of return is 7%. Your current salary stands at $16,000, accompanied by company dividends of $4,000. In the next period, company dividends will be $6,000, but you will not be working and will have no income, and your survival requires $10,320. 

You need $12,000 to cover your living expenses this period, will you be able to afford the $2,000 iPad? 

In this scenario, what can you do?

Answer rating: 100% (QA)

To determine if you can afford the 2000 iPad in this scenario lets calculate your expected wealth fo... View the full answer