Consumer has utility function ln(c1)+beta*ln(c2), where beta=1. Interest rate i=50%. Income y1=10 and y2=50. There is no government. Optimal saving for the consumer is s=______. (Hint: s can be positive or negative)
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Consumer has utility function ln(c1)+beta*ln(c2), where beta=1.
Interest rate i=50%.
Income y1=10 and y2=50.
There is no government.
Optimal saving for the consumer is s=______. (Hint: s can be positive or negative)
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- An investment type which is independent of income is known as ____________Consider the Consumption and Savings model with random future income. The utility function of the individual is: u(C0, C1) = (C0) + (C1)1/2, where C0 is present consumption expenditure and C1 is future consumption. Let the present income be $5, the interest rate in the financial market r = 5%, and the probability distribution of future income Y1 = (1, 2; 1/2 , 1/2). Calculate the expected utility of saving $0 (consume $5 in the present) (use two decimals)An investor with an initial endowment of $ 16,000 is confronted with the following productivity curve: C1= 240 (16,000 - C0)^0.5 where C0 denotes consumption at present, and C1 consumption in the future. Assume the interest rate (for borrowing and lending) is 20%. The investor's utility function, from which it is possible to derive his indifference curves, is defined as: U(C0,C1) =C0C1 How much will the investor invest in production? A)$16,000 B)$0 C)$10,000 D)$12,000
- A consumer who starts at point B will want to borrow, but as little as possible in order to minimise the cost of interest. is it true or falseIf Samantha's income is reduced to zero after she loses her job, her consumption will be ________ and her saving will be ________. Group of answer choices greater than zero; less than zero less than zero; less than zero greater than zero; greater than zero less than zero; greater than zeroHigher interest rates are likely to Group of answer choices decrease consumer spending and increase consumer saving. have no effect on consumer spending or saving. increase consumer spending and decrease consumer saving. decrease both consumer spending and consumer saving.
- What is the expected return from an investment if there is a 20 percent chance of a 4 percent return, a 40 percent chance of a 8 percent return, and a 40 percent chance of a 12 percent returnShow, using equations or a diagram, that an expected utility maximizer requires a higher return for a riskier assetMarginal propensity to save is: A total saving divided by total income. B the change in total saving divided by the change in total income. C total saving when total income is zero. D total saving that is based on expected future income.
- Suppose you buy a house for $250,000. One year later, the market price for the house has fallen to $200,000. What is the return on your investment in the house if you made a down payment of 10 percent and took out a mortgage loan for the other 90 percent?As an investment advisor, you tell a client that an investment in a mutual fund has (over the next year) a higher expected return than an investment in the money market. The client then asks the following questions: a. Does that imply that the mutual fund will certainly yield a higher return than the money market? b. Does it follow that I should invest in the mutual fund rather than in the money market? How would you reply?Indicate whether the statement is true or false, and justify your answer.Consider two investment streams w and z which pay out some amount, w(t) and z(t), in each period t. (The amount may be negative in some periods.) If the interest rate is exactly equal to the internal rate of return of w(t), the net present value of choosing w over z is zero.
