What is the optimal value of current consumption

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Reference no: EM131091385

Suppose you are given the utility function:

U space equals space ln space c space plus space left parenthesis 0.25 right parenthesis space ln space c apostrophe

and the budget constraint:

c space plus thin space fraction numerator c apostrophe over denominator 1 space plus space r space end fraction space equals space y space plus space fraction numerator y apostrophe over denominator 1 space plus space r end fraction

where y = 100, y' = 120, and the interest rate r = 0.05.

What is the optimal value of current consumption c*? Show all steps.

Reference no: EM131091385

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