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Personal Budget - Assignment Example
Having no source of income is difficult, the reason why this people need to maintain the balance to be able to survive for the two periods. Now the setting, one-good world in which a person is born with a lump of money and lives two periods. And the challenge is them allocate their lump across the two periods and have no source of income other than the interest that they could acquire by putting some part of their money in an interest-bearing bank account…
The money to be deposited is $ 4, 400, 000. This will give interest of 5% per month. This will be equivalent to $2,200,000. For 65 years he will earn $1,716,000,000. This shows how much and rich this man is. The run of his life will surely be a success one and full of pleasures and desires.
As to compute the whole interest from his savings in the bank. He will be earning a double of his earning for a year. But if he is going to increase his consume and expenses, the chances of earning big interests will decrease. By having a thrifty living with a lump of money will just put him into boredom. But to consume almost 75% of the 50% of his money to the bank for his simple living will make him live relaxing and fine. All this was just if he will live alone. But if he is to live with his own family, which is compose of the mother and father he will probably need to budget everything and balance everything. He needs to give much money to the bank to make it give him a big interest amount, but the opposite of that he needs to live spending much money to build and maintain his family eating 3 times a day. His all expenses will be tripled.
The more money he will give to the bank, the bigger it will increase the amount of his money. ...