ms. venus consumption next year will be $154
How to calculate the consumption ?
The first step is to write out the parameters
ms. venus has $100 this year and $110 next year
the market interest rate is 10 percent per year
ms. venus will consume $60 next year
Therefore her consumption can be calculated as follows
(100-60) × 1.1 + 110
= 40 × 1.1 + 110
= 44 + 110
= 154
Hence the consumption for next year is $154
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