Analisi Inditex
a. What is the expected value of earnings in the middle period of life? Given this number, what is the present value of expectedlifetime labor earnings? If the consumer wishes to maintain constant expected consumption over her lifetime, how much will she consume in each period? How much will she save in each period?
Theexpected value of earnings in the middle age is 40.000x0,5 + 100.000x0,5 = 70.000 €
Present discounted value 20.000(earnings 1st period) +70.000(earnings 2nd period) +0= 90.000 €
ConsumptionLevel = (Present discounted value)/(number of periods) (20.000 + 70.000 + 0)/3= 30.000 €
Due to the earnings of the first period are only 20000€, the consumer will have to ask for borrow 10000€,because she’ll want to spend 30000€ every period. In every period she will spend 30000€. In the first she will not save any € (ask for 10000€) in the second one she will save 40000€ and in the thirdshe will not save anything.
b. Now suppose the consumer wishes, above all else, to maintain a minimum consumption level of €20.000 in each period. So she considers the worst possible outcome: thatmiddle age earnings turn out to be €40.000. How much should she spend in the first period to guarantee consumption of at least €20.000 each period? How does this compare with your result in part (a)?If she considers the worst possible scenario the present discounted value would be 60000€ (20000+40000+0). And the consumption of every period would be 60000/3= 20000€ for period.
If we...
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