The next questions refer to the following.
An individual is endowed with $100 of income in period 1, and will receive an income of 121 in period 2. The interest rate is 10%, and there are only 2 periods.
-The maximum second period consumption is
A) 100
B) 121
C) 221
D) 231
E) 233.1

Question

Quizplus · Accepted Answer

The individual can save the entire $100 from period 1, which will grow to $110 in period 2 due to the 10% interest rate. Adding this to the $121 income in period 2 gives a maximum consumption of $231 in period 2.

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