Enrique Rodrigues has $65,000 this year available to invest or consume immediately.

He faces the investment opportunities (in real assets) represented by curve EG in the

following figure, in which the horizontal access represents consumption this year and

the vertical access represents consumption next year.

The line CD represents investment opportunity available to Enrique in terms of

saving/borrowing on the financial market (i.e. buying/selling financial assets). This line

is tangent to the curve EG at point B.

Enrique wants to consume $22,000 this year and $65,100 next year. This pattern of

consumption is represented by point F.