lara beal allocates wealth between two periods: youth and old age. currently (in her youth) she has $8,000 in cash. she can lend and borrow at the bank at 15% (that is, lending $1 in youth will give her $1.15 in old age). her only investment opportunity other than the bank is a project that costs $5,000 now in her youth and has a payoff of $6,000 in her old age. what is the most she can consume in her old age?
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Answer:
9,800
Explanation:
8,000 x 15% = 1,200
5,000 + 6,000 = 11,000
11,000 - 1,200 = 9,800
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