Q 5

If Peregrine in Problem 1 consumes (1, 500, 880) and earns (1, 300, 1, 100) and if the interest rate is 10%, the present value of his endowment is
A) $4,830.
B) $2,400.
C) $2,300.
D) $2,380.
E) $6,130.

Q 6

Suppose that Molly from Problem 2 had an income of $500 in period 1 and an income of $250 in period 2. Suppose that her utility function were c^{a}_{1}c^{1}^{-}^{a}_{2}, where a = 0.60 and the interest rate were 25%. If her income in period 1 doubled and her income in period 2 stayed the same, her consumption in period 1 would
A) double.
B) increase by $300.
C) increase by $150.
D) stay constant.
E) increase by $500.

Q 7

Suppose that Molly from Problem 2 had an income of $400 in period 1 and an income of $690 in period 2. Suppose that her utility function were c^{a}_{1}c^{1}^{-}^{a}_{2}, where a = 0.80 and the interest rate were 15%. If her income in period 1 doubled and her income in period 2 stayed the same, her consumption in period 1 would
A) stay constant.
B) increase by $320.
C) increase by $160.
D) double.
E) increase by $400.