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Assume You Are a 25-Year Old Who Expects to Work $1,000,000\$ 1,000,000

Question 30

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Assume you are a 25-year old who expects to work for 40 years and then enjoy 30 years of retirement. (Assume a discount rate of 3 percent.) If you behave according to the life-cycle/permanent income hypothesis, how would your current consumption change if: a. You win $1,000,000\$ 1,000,000 in the lottery this year.
b. You expect to get a $1,000,000\$ 1,000,000 "signing bonus" when you get a job next year.

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Under the first scenario the present val...

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