OA 1.34M 2M () 1.1167M (iii) Alternatively he can plan to spend it all next period Total in old age= 1.2x.000+200.000 $1,340,000 As before, we can go on doing this until we trace out a straight-line budget constraint as before. The equation for this line is COA=1.34M-1.2C￥ The slope is again.2 since the interest rate is 20%. You can see that this follows from the structure of the problem since all values in Old Age are multiplied by 1.20 compared to their values in youth Project B Now suppose he undertakes the first and second projects, A and B, so that he produces at A+B. We can go through the same calculations again and get another line representing his consumption possibilities7 (iii) Alternatively he can plan to spend it all next period. Total in old age = 1.2 x 950,000 + 200,000 = $1,340,000 As before, we can go on doing this until we trace out a straight-line budget constraint as before. The equation for this line is COA = 1.34M - 1.2 CY The slope is again - 1.2 since the interest rate is 20%. You can see that this follows from the structure of the problem since all values in Old Age are multiplied by 1.20 compared to their values in Youth. Project B Now suppose he undertakes the first and second projects, A and B, so that he produces at A + B. We can go through the same calculations again and get another line representing his consumption possibilities