Suppose Lily is a 20-year-old university student. According to what you have learned in this subject,design a life-cycle model forher.

Note: 1. In your work, you should first, present clearly your assumptions and any notations you adopt for your work.

2. You should compute how much Lily needs to save for her retirement by assuming that she needs to maintain the same level of consumption spending before and after retirement.

Question 2 (50%). Solve an incentive problem related to finance you or your relatives encountered.Youshould

1. State clearly what the problemis,and why this problem is related to finance;

2. Solve this problem using the knowledge you have learned in this subject. Present the details.