1. George is currently 30 years old, plans to retire at the age of 65 and...

1. George is currently 30 years old, plans to retire at the age of 65 and to live to the age of 85. His labor income is $25,000 per year, and he intends to maintain a constant level of real consumption spending over the next 55 years. Assume no taxes, no growth in real salary, and a real interest rate of 3% per year.

a. What is the value of George’s human capital?

b. What is his permanent income?

c. What effect would a $1 million inheritance, that you expect to receive 30 years from now, have on your permanent income? (Assume a real interest rate of 3% per year and that the $1 million inheritance is in constant dollars.)

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Expert Solution

ekkarill92 answered 1 year ago

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