Scenario 21-3
Diane knows that she will ultimately face retirement.Assume that Diane will experience two periods in her life,one in which she works and earns income,and one in which she is retired and earns no income.Diane can earn $250,000 during her working period and nothing in her retirement period.She must both save and consume in her work period with an interest rate of 10 percent on savings.
-Refer to Scenario 21-3.If the interest rate on savings increases,it is possible that

Question

Quizplus · Accepted Answer

An increase in the interest rate on savings can lead to different behaviors. Diane might save more to take advantage of higher returns (B), save less if she feels she can achieve her retirement goals with less saving due to higher returns (A), or maintain her current consumption pattern if her preferences or needs dictate (C).

Scenario 21-3 Diane Knows That She Will Ultimately Face Retirement.Assume That Diane