An individual has an income of $4,000 in period 0 and $0 in period 1. The individual has the potential investment opportunities given below:
An individual has income of $10,000 in period 0 and $25,000 in period 1. An investment opportunity that costs $10,000 in period 0 is worth $10,500 in period 1. The market interest rate is 8%. What is the maximum possible consumption in period 1 if the individual consumes $20,000 in period 0 and the individual follows the NPV rule?

Question

An individual has an income of $4,000 in period 0 and $0 in period 1. The individual has the potential investment opportunities given below:
  An individual has income of $10,000 in period 0 and $25,000 in period 1. An investment opportunity that costs $10,000 in period 0 is worth $10,500 in period 1. The market interest rate is 8%. What is the maximum possible consumption in period 1 if the individual consumes $20,000 in period 0 and the individual follows the NPV rule?

Quizplus · Accepted Answer

The Answer of An individual has an income of $4,000 in period 0 and $0 in period 1. The individual has the potential investment opportunities given below:
  An individual has income of $10,000 in period 0 and $25,000 in period 1. An investment opportunity that costs $10,000 in period 0 is worth $10,500 in period 1. The market interest rate is 8%. What is the maximum possible consumption in period 1 if the individual consumes $20,000 in period 0 and the individual follows the NPV rule?

An Individual Has an Income of $4,000 in Period 0