Can someone explain me in detail how to solve problem #163. I don't understand how the book came up with the solution: s/I?
let Henry's income be I, amount spent X and amount saved S
The amount next year Henry will have to spend is S(1+r)
we need to find S/I in terms of r
Now S(1+r) = 1/2 X ==> X = 2S(1+r) ====> I -S = 2S(1+r) ==> I = S [ 2(1+r) + 1]
==> I = S[ 3+ 2r] ==> S/I = 1/(3+ 2r)