![What is the optimal investment?]() |
Question: What is the optimal investment?
(Posted by: on 2010-09-08 15:36:59)
Hi. I think this is a pretty hard question. I can`t figure it out myself, here it is: InCompanyx production possibility frontier (ppf) is represented by the function C1 = 200 ln( W0 - C0 ) where C1 = next- period (in one year) consumption, 200 represents the firm's technology coefficient, ln = the logarithm, W0 = 1000 = shareholders' (consumers') current wealth, and C0 = shareholders' current (t=0) consumption. Let I0 = this period's (at t=0) investment facilitating consumption next period (at t=1). Assume that the money- market rate of interest of 20 % per year represents shareholders' required rate of return on real investments by IComanyx. Based on the information provided above; IndProTeX's value- maximizing real- investment this period is `? |
