Julia Earns $60,000 Each Year for Two Consecutive Years

question 12

Multiple Choice

Julia earns $60,000 each year for two consecutive years.She has an option to invest in treasury funds to earn a 5% interest today,and consume the entire amount in the second year.Alternatively,she can choose to borrow money at 5% against the second period's income.Assume that the optimum decision for her is to invest money at 5%.Determine the maximum amount she could consume in period 2.

• A) $60,000
• B) $0
• C) $123,000
• D) $117,143

---

Definitions:

Market

A place or system where buyers and sellers interact to trade goods, services, or resources.

Price

The money total set, required, or given as remuneration for something.

Consumer Surplus

The difference between the maximum price a consumer is willing to pay for a good or service and the actual price they pay.

Equilibrium

A state in which market supply and demand balance each other, and as a result, prices remain stable.