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Refer to Figure 21-19. If Hannah chose to spend $30,000 on consumption when young, then how much could she spend on consumption when old?
On Jul 04, 2024
The interest rate is
50,000÷40,000−1=0.2550,000 \div 40,000 - 1 = 0.2550,000÷40,000−1=0.25 or 25 percent. If she spent $30,000 when young, then she would save $10,000 and have
$10,000×1.25=$12,500\$ 10,000 \times 1.25 = \$ 12,500$10,000×1.25=$12,500 to spend when old.