Andy and Kim live together. Andy may invest $6,000 (possibly by taking on an extra job to earn the additional money) in Kim's education this year. This investment will raise Kim'sfuture earnings by $28,000 (in present value terms). If they stay together, they will share the benefit from the additional earnings. However, the probability is 80% that they will split upin the future. If they were married (or in a civil union) and then split, Andy would get half of Kim's additional earnings. If they were living together without any legal ties and they split,then Andy would get nothing. Suppose that Andy is risk neutral. Will Andy invest in Kim's education? Does your answer depend on the couple's legal status?A. Andy will not invest in Kim's education regardless of legal ties.B. Andy will invest in Kim's education only if they do not have legal ties.C. Andy will invest in Kim's education only if they have legal ties.D. Andy will invest in Kim's education regardless of legal ties.E. Andy will be indifferent about investing in Kim's education regardless of legal ties.

In this scenario, we have Andy and Kim, who are living together. Andy is considering investing…

Answered: Andy and Kim live together. Andy may…

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