In a Two-Year Period,suppose Gloria Has $10,000 in Income in Year

question 55

Multiple Choice

In a two-year period,suppose Gloria has $10,000 in income in year 1 and $4,300 in income in year 2.In order to maintain her optimal consumption of $8,000 in year 1 and $6,500 in year 2,she can borrow or lend at a rate of 10 percent.If Gloria's income stream changes such that she earns $3,000 in Year 1 and $12,000 in Year 2,the budget line will:

• A)shift out away from the origin.
• B)pivot about the endowment point.
• C)pivot about the intercept on the axis representing year 2 income.
• D)remain unchanged.

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Definitions:

Annuity

An investment vehicle offering a consistent series of disbursements to a person, commonly utilized as a revenue source for those in retirement.

Present Value

The current value of a future sum of money or stream of cash flows given a specified rate of return, used in discounted cash flow analysis.

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Inquiries aimed at verifying the accuracy and dependability of information or responses.

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