Smith lives in a world with two time periods. His income in each period, which he receives at the beginning of each period, is $210. If the interest rate, expressed as a fraction, is 0.05 per time period, what is the present value of his lifetime income? Draw his intertemporal budget constraint. On the same axes, draw Smith's intertemporal budget constraint when r = 0.20.

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Kamari Hooper

27 November, 11:32

Smith lives in a world with two time periods. His income in each period, which he receives at the beginning of each period, is $210. If the interest rate, expressed as a fraction, is 0.05 per time period, what is the present value of his lifetime income? Draw his intertemporal budget constraint. On the same axes, draw Smith's intertemporal budget constraint when r = 0.20.

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Marshall Ferguson · Answer 1

Base on the question and in my further computation, Smith's income in each period

is $210 time 12 month so it would become 2550 and minus the 126 of the interest rate so it would become 2394. I hope you are satisfied with my answer and feel free to ask for more if you have questions and further clarifications