$Next Year D B $ Now A As a financial analyst at Citibank, you want to help your client, John Smith, determine how to allocate his income and consumption over this year and next. Refer to the above graph. Point A is $5000 and Point B is $5700. The solid sloping line represents the opportunities for investment in the capital market. Suppose John Smith has $5,000 now available to support consumption in periods 0 (now) and 1 (next year). Suppose John is given an opportunity to invest up to $5,000 at 25% risk-free in his friend startup business. John wants to consume exactly the same amount in each period. How much can he consume this period and next period? a. What is the market interest rate (sample answer: 18.42%) b. How much will he consume this period ? (sample answer: $1500.45) $Next Year D B $ Now A As a financial analyst at Citibank, you want to help your client, John Smith, determine how to allocate his income and consumption over this year and next. Refer to the above graph. Point A is $5000 and Point B is $5700. The solid sloping line represents the opportunities for investment in the capital market. Suppose John Smith has $5,000 now available to support consumption in periods 0 (now) and 1 (next year). Suppose John is given an opportunity to invest up to $5,000 at 25% risk-free in his friend startup business. John wants to consume exactly the same amount in each period. How much can he consume this period and next period? a. What is the market interest rate (sample answer: 18.42%) b. How much will he consume this period ? (sample answer: $1500.45)