3a-d answer for thumb up

Suppose our old friend Tilia Thyme can choose between expenditures this year and expenditures next year. She has $100,000 in assets (thanks to a wise investment in a house on Pine Street) and an income today of $50,000 (with a good teaching job in Milton). She expects no pay raise and zero inflation (so Tilias real income next year will still be $50,000). Current interest rates are 10%. The price of consumption is $1.

a.Write the equations representing Tilia Thymes resources in year 1 and year 2. Calculate total resources available in year 1 and year 2 (show your work). R1 = R2 =

b. Graph Tilias budget line on the graph below. Label all axes and show numbers for the intercepts. What is the slope?

c.Identify clearly on your graph how much Tilia could consume this year and next year (calculate the dollar amounts) if this year she spent: i. her current income and assets; ii. her current income and assets and $10,000 borrowed, including interest (hint: this means future resources decrease by exactly $10,000, but in the present Tilia must consume less than the full $10,000 borrowed!); iii. her current income only

d. What is the maximum amount of interest (in dollars) Tilia could possibly earn? ____________