In period 2 she will have ba in business and income will be

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Maria lives 2 periods. In period 1, she is a student in Philosophy. Her income is 0 and she does not pay taxes. In period 2, she will have a BA in Philosophy. Her income after tax will be $55,000. The interest rate is 10% (0.10). Her utility is given by

It can be shown that the optimal consumption allocation is:

a. Determine Maria's lifetime wealth.

b. Determine consumption and savings of Maria in period 1 and in period 2.

c. Maria decides to switch a major and is now a student in Business. In period 2, she will have a BA in Business and her income will be $88,000. Determine Maria's life time wealth. Determine consumption and savings of Maria in period 1 and in period 2.

Reference no: EM13392252

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