The diagram depicts Marco's choice of consumptions in periods 1 and 2. He has $100 worth of grain in period 1 and no income in period 2. Marco decides to invest the entire amount of grain, which gives a return of 50%, and borrow against this future income at a 10% interest rate in order to consume $80 in period 1 (point A). Which of the following statements regarding his balance sheet is correct? Consumption later, $ 1504 62 0 FF (invest grain; 50% return) FF (invest grain; 50% return; borrow at 10%) 80 100 Consumption now, $ 136

The diagram depicts Marco's choice of consumptions in periods 1 and 2. He has $100 worth of grain in period 1 and no income in period 2. Marco decides to invest the entire amount of grain, which gives a return of 50%, and borrow against this future income at a 10% interest rate in order to consume $80 in period 1 (point A). Which of the following statements regarding his balance sheet is correct? Consumption later, $ 1504 62 0 FF (invest grain; 50% return) FF (invest grain; 50% return; borrow at 10%) 80 100 Consumption now, $ 136

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter17: Capital And Time

Section: Chapter Questions

Problem 17.2P

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