How much wealth to consume

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Reference no: EM133221504

Assignment:

You are trying to decide how much (wealth) to consume each year over a period of six years. You have an initial savings, and a yearly income, as given. Your year end wealth in each year is your initial wealth, plus your income, minus your consumption. You gain x).

Determine how much to consume each year, to maximize your total discounted utility of consumption with discount factor γ ∈ (0, 1) (where your utility is discounted by how far into the future it is, i.e., Year 1 is the current year and is not discounted, Year 2 is the next year and is discounted by γ, Year 3 is discounted by γ2). Your year end wealth can never be negative.

Please provide detail analysis including Excel solution

Input
Initial savings	200
Discount factor	0.95
	Income
Year 1	106
Year 2	107
Year 3	116
Year 4	112
Year 5	109
Year 6	100

Reference no: EM133221504

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