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Support the consumption in periods

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Reference no: EM133056146

a. What is the market interest rate [x]? (sample answer: 18.42%)

As a financial analyst at Citibank, you want to help your clients to determine how to the income and consumption over this year and next. Refer to the above graph. Point A is $5000 and Point B is $5700. The solid sloping line represents the opportunities for investment in the capital market. Suppose John Smith has $5,000 now available to support the consumption in periods 0 (now) and 1 (next year). John wants to spend the equal amount this year and next. Please answer the following questions.

How much will John Smith consume this period and next?

Reference no: EM133056146

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