Casper Milk toast has $200,000 available to support consumption in periods 0 (now) and 1 (next year).
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Question:
a. How much should he invest, and how much can he consume in each period?
b. Suppose Casper is given an opportunity to invest up to $200,000 at 10 percent risk free. The interest rate stays at 8 percent. What should he do, and how much can he consume in each period?
c. What is the NPV of the opportunity in(b)?
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