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An individual (with log-utility) wants to maximize her happiness level over her adolescence and adult periods. At the age 18 the individual inherits one hundred
An individual (with log-utility) wants to maximize her happiness level over her adolescence and adult periods. At the age 18 the individual inherits one hundred thousand dollars and must decide how much to consume now (when she is young, period t ) and how much to save for her adulthood (period t+1 ) to maximize the sum of utility over different life stages. The bank will pay interest rate of 5% of every dollar she deposits. The individual discounts future utilities at =0.8. What is the optimal consumption in the t+1 period? 46669.6746675.6746666.6746672.66
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