Y5

a. How much is $5 million to be delivered 300 years in the future worth today if the interest rate is 10 percent? 2 marks b. As the interest rate rises, does the intertemporal budget constraint become steeper or flatter? 2 marks a. What is the present value of G$5000 one year from now if the interest rate is 14%? What is the present value if the interest rate is 6.5%? 4 marks b. A consumer, who is initially a lender, remains a lender even after a decline in interest rates. Is this consumer better off or worse off after the change in interest rates? If the consumer becomes a borrower after the change is he better off or worse off? 2 marks