Should be solved with Excel Marginal K2 (return return on on market production Marginal Marginal return on return on production market MVI-previ wealth Excess ($14.860 return of initially) marginal PV of investment Excess in Return on production marginal investment intra 0 0 $0,50 1 1.5 2 2.5 3 3,5 4 4,5 5 5,5 6 0 $0.50 0,5 0,5 0,5 0.5 0,5 0.5 0,5 0.5 0,5 $14.86 $14,36 $13,86 $13,36 S12,86 SI2,36 $11.86 $11.36 S10.86 $10,36 $9.86 $9,36 $8.86 0 $3.85 S5,38 $6.52 $7,46 $8.26 $8.96 $9.59 $10,15 $10,66 $11,13 $11.55 S11,94 $0.55 $1,10 $1,65 $2,20 $2,75 $3,30 $3.85 $4,40 $4,95 $5.50 $6,05 $6,60 0 53.85 $1,53 $1.14 $0.94 $0.80 S0.70 0.63 $0,56 $0.91 $0,46 $0.42 50,39 0 $0.55 50,55 $0.55 S0,55 $0.55 0,55 S0,35 50,55 $0.55 $0,55 $0,55 S0,55 0 $3.30 $0.98 $0.59 $0.39 $0.25 $0.15 $0.08 $0.01 -$0.04 -0.09 -S0,13 -50.16 $14,86 $17.86 $18,75 $19,29 $19,64 $19.87 520,01 $20,08 $20,09 $20.05 $19,97 $19,86 $19,71 0.5 0,5 In the above "ageing wine" (see Section 3.3) problem, inherited resources time I value of inherited wine equals 14.86 The vintner has also inherited knowledge about the wine ageing technology which is KI^2+K22 =221 The market interest rate equals 10%. This means any timel savings can be lent in the capital market and grows by 10% during the year. Similarly any time2 amount has to be discounted by 10% to obtain its current value. Answer the following questions: a) suppose the vintner invests 50 cents only by how much does her his wealth increases? Very Briefly exp suppose the vintner invests a second 50 cents (namely total is 1 but we are focusing on the second 50 cents) b) what is the MARGINAL return of this second 50 cents when invested into ageing wine! Very Briefly exp c) what is the MARGINAL return of this second 50 cents when invested into lending? Very Briefly exp d) between (b) and (c) which option will the vintner choose? Very Briefly exp e) what is the wealth maximizing level of total investment? Very Briefly exp Should be solved with Excel Marginal K2 (return return on on market production Marginal Marginal return on return on production market MVI-previ wealth Excess ($14.860 return of initially) marginal PV of investment Excess in Return on production marginal investment intra 0 0 $0,50 1 1.5 2 2.5 3 3,5 4 4,5 5 5,5 6 0 $0.50 0,5 0,5 0,5 0.5 0,5 0.5 0,5 0.5 0,5 $14.86 $14,36 $13,86 $13,36 S12,86 SI2,36 $11.86 $11.36 S10.86 $10,36 $9.86 $9,36 $8.86 0 $3.85 S5,38 $6.52 $7,46 $8.26 $8.96 $9.59 $10,15 $10,66 $11,13 $11.55 S11,94 $0.55 $1,10 $1,65 $2,20 $2,75 $3,30 $3.85 $4,40 $4,95 $5.50 $6,05 $6,60 0 53.85 $1,53 $1.14 $0.94 $0.80 S0.70 0.63 $0,56 $0.91 $0,46 $0.42 50,39 0 $0.55 50,55 $0.55 S0,55 $0.55 0,55 S0,35 50,55 $0.55 $0,55 $0,55 S0,55 0 $3.30 $0.98 $0.59 $0.39 $0.25 $0.15 $0.08 $0.01 -$0.04 -0.09 -S0,13 -50.16 $14,86 $17.86 $18,75 $19,29 $19,64 $19.87 520,01 $20,08 $20,09 $20.05 $19,97 $19,86 $19,71 0.5 0,5 In the above "ageing wine" (see Section 3.3) problem, inherited resources time I value of inherited wine equals 14.86 The vintner has also inherited knowledge about the wine ageing technology which is KI^2+K22 =221 The market interest rate equals 10%. This means any timel savings can be lent in the capital market and grows by 10% during the year. Similarly any time2 amount has to be discounted by 10% to obtain its current value. Answer the following questions: a) suppose the vintner invests 50 cents only by how much does her his wealth increases? Very Briefly exp suppose the vintner invests a second 50 cents (namely total is 1 but we are focusing on the second 50 cents) b) what is the MARGINAL return of this second 50 cents when invested into ageing wine! Very Briefly exp c) what is the MARGINAL return of this second 50 cents when invested into lending? Very Briefly exp d) between (b) and (c) which option will the vintner choose? Very Briefly exp e) what is the wealth maximizing level of total investment? Very Briefly exp