Harry Hernandez has ($60,000) this year. He faces the investment opportunities represented by point B in the
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Harry Hernandez has \($60,000\) this year. He faces the investment opportunities represented by point B in the following figure. He wants to consume \($20,000\) this year and \($67,500\) next year. This pattern of consumption is represented by point F.
a. What is the market interest rate?
b. How much must Harry invest in financial assets and productive assets today if he follows an optimum strategy?
c. What is the NPV of his investment in nonfinancial assets?
Transcribed Image Text:
Consumption next year $90,000 D $67,500 $56,250 B -(1+r) C Consumption this year $60,000 $80,000 $30,000 $20,000
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