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July 17 Assignment (1) - Word (Product Activation Failed) X FILE HOME INSERT DESIGN PAGE LAYOUT REFERENCES MAILINGS REVIEW VIEW Sign in 3. Every day Danny thinks about retirement. Suppose Danny is deciding how much to consume now and how much to save for retirement. His marginal utility for consumption today is MU, = - and his marginal utility for consumption in retirement is MU2 = . He can save using a Vanguard ETF and earn 7% as the real interest rate and his income is $1,000. (He is underpaid.) [5 points] Set up the MRS = Price Ratio formula for Danny. [6 points] If you use the budget constraint C1 + C2/(1+i) = Y where Y is income and i is the interest rate, and your equation from (a) you can solve for C1 and C2. What are they? How much does Danny save? [These won't be nice round numbers.) [8 points] Suppose the interest rate rises to 15%. Find the new C1, C2 and amount of saving. Does Danny save more or less because of the higher interest rate? Briefly explain using the relevant key terms from class. Activate Windows Go to Settings to activate Windows. PAGE 3 OF 8 944 WORDS + 100% H O WE 1:47 AM (6 7/24/2020