The next questions refer to the following.
Consider an individual who enters adulthood and the labor force at age 18, expects to work 5 years at a real income of $10,000 per year, anticipates earning a real income of $40,000 per year from age 23 to 63, expects to retire with a $10,000 annual pension, and live until age 78. Suppose the interest rate is zero, and the individual seeks perfectly smooth consumption across his adult lifetime.
-Suppose there are no borrowing constraints but the individual wishes to leave a bequest of $120,000 (after adjusting for inflation) to heirs. Then annual consumption should be
A) $12,000
B) $16,000
C) $20,000
D) $24,000
E) $28,000

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The Answer of The next questions refer to the following.
Consider an individual who enters adulthood and the labor force at age 18, expects to work 5 years at a real income of $10,000 per year, anticipates earning a real income of $40,000 per year from age 23 to 63, expects to retire with a $10,000 annual pension, and live until age 78. Suppose the interest rate is zero, and the individual seeks perfectly smooth consumption across his adult lifetime.
-Suppose there are no borrowing constraints but the individual wishes to leave a bequest of $120,000 (after adjusting for inflation) to heirs. Then annual consumption should be
A) $12,000
B) $16,000
C) $20,000
D) $24,000
E) $28,000

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