Question
1. (15 pts) Justin Bloomberg just turned 20. He has no job, no income, but a talented father who is a famous singer. His father
1. (15 pts) Justin Bloomberg just turned 20. He has no job, no income, but a talented father who is a famous singer. His father has put in the will that he will bequest $100 million to Justin on Justins 50th birthday. Knowing this, Justin decides not to find any job, but to borrow against his fathers will to finance his consumption until age 50. Justin expects to live to age 90. Suppose the interest rate is constant at 3%. Ignore taxes and social security. (please clearly state what, if any, excel functions you use and what to plug in).
(a) What is Justins permanent income?
(b) How much does Justin need to borrow in present value terms?
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