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Unformatted text preview: the price in the working years (p 1 ) to 1, and suppose inflation between the two periods is 3%. Also, assume the interest rate (r) is 5%. His utility from consumption in each period can be represented by the function ° ( ± 1 , ± 2 ) = ln( ± 1 ) + ² ln( ± 2 ) , where β = .95 is the rate at which he discounts future utility. Tom expects to earn $100 in his working years, and he expects only a social security payment of $20 in his retirement years. How much should Tom save in order to maximize his lifetime utility?...
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This note was uploaded on 04/26/2010 for the course ECO 420K taught by Professor D during the Spring '10 term at University of Texas at Austin.
- Spring '10