Question

Maryanne expects to work for another 30 years and expects to live another 10 years after she retires. If Maryanne completely smooths consumption over her​ lifetime, for every​ $1,000 increase in disposable​ income, she will use​ ________ for consumption each year.

Answer 1

$750

Step-by-step explanation:

Since we are not given any interest rate, we have to assume that Maryanne will not earn any interest from her savings.

She expects to retire in 30 years and after that expects to live 10 more years. Then she is going to earn money for the 75% of her remaining life. For every $1,000 earned, she needs to save?

$1,000 x 30 = 40X

$30,000 = 40X

X = $30,000 / 40 = 750