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An investor with an initial endowment of $16,000 is confronted with the following productivity curve: C1= 240(16,000 - C0)^0.5 where C0 denotes consumption at present,
An investor with an initial endowment of $16,000 is confronted with the following productivity curve: C1= 240(16,000 - C0)^0.5
where C0 denotes consumption at present, and C1 consumption in the future. Assume the interest rate (for borrowing and lending) is 20%. The investor's utility function, from which it is possible to derive his indifference curves, is defined as: U(C0, C1) =C0C1
What is the NPV of the Investment chosen by the investor ?
$16,000
$31,200
$10,000
$6,000
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