Ms. Venus has $100 income this year and $110 next year. The market interest rate is 10 percent per year. Suppose Ms. Venus consumes $60 this year. What will be her consumption next year?
A)$120
B)$154
C)$170
D)$210

Question

Quizplus · Accepted Answer

Ms. Venus has $100 income this year and decides to consume $60, leaving her with $40 to save. With a 10% interest rate, her savings will grow to $44 by next year ($40 * 1.10). Next year, she also earns $110, so her total available for consumption next year is $110 (income) + $44 (savings with interest) = $154.

Ms Venus Has $100 Income This Year and $110 Next