Sue is an exponential discounter. Her discount function which illustrates her preference for money at various points
Question:
∂(t)=1/(1.07)t for t=0,1,2,...
Bob on the other hand is a hyperbolic discounter. His discount function is:
∂(t) = 1 for t=0
= .8/(1.03)t-1 for t=1,2,...
a. What would Sue/Bob rather have: $1 today or $1.10 next year? Explain.
b. What would Sue/Bob rather have: $1 next year or $1.10 the year after that? Explain.
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 40% (5 reviews)
a Sue 110 1107 1 110 is what she has in one year 1107 is her personal present value ...View the full answer
Answered By
Ali Khawaja
my expertise are as follows: financial accounting : - journal entries - financial statements including balance sheet, profit & loss account, cash flow statement & statement of changes in equity -consolidated statement of financial position. -ratio analysis -depreciation methods -accounting concepts -understanding and application of all international financial reporting standards (ifrs) -international accounting standards (ias) -etc business analysis : -business strategy -strategic choices -business processes -e-business -e-marketing -project management -finance -hrm financial management : -project appraisal -capital budgeting -net present value (npv) -internal rate of return (irr) -net present value(npv) -payback period -strategic position -strategic choices -information technology -project management -finance -human resource management auditing: -internal audit -external audit -substantive procedures -analytic procedures -designing and assessment of internal controls -developing the flow charts & data flow diagrams -audit reports -engagement letter -materiality economics: -micro -macro -game theory -econometric -mathematical application in economics -empirical macroeconomics -international trade -international political economy -monetary theory and policy -public economics ,business law, and all regarding commerce
4.00+
1+ Reviews
10+ Question Solved
Related Book For
Behavioral Finance Psychology Decision-Making and Markets
ISBN: 978-0324661170
1st edition
Authors: Lucy Ackert
Question Posted:
Students also viewed these Finance questions
-
Consider the Edgeworth box diagram at the right, which illustrates the amount of peaches and cream in the refrigerator of Billy Joe and Bobby Sue. a. How many peaches do Billy Joe and Bobby Sue have...
-
On Monday morning, Polly Putitov faces the same assignment as Darryl Dawdle. It will also take her 12 hours to finish the term paper. However on day t, her preferences about time spent writing over...
-
Economist Daron Acemoglu of the Massachusetts Institute of Technology has written extensively about the role of political institutions and economic growth. Acemoglu distinguishes broadly between two...
-
Show that = E[(m(X) - X'p)] B = argmind (b) = (E[XX']) E[Xm(X)] = [E[XX'])E[XY]. berk Hint: To show E[Xm(X)] = E[XY] use the law of iterated expectations. then
-
The Abby Arboretum (AA) has several programs, each of which has its own fund. AA also has several other important funds such as a Debt Service Fund and an Operating Fund (which handles all...
-
What should I do in this situation? Should I confront my roommate? What should I say? Should I go to management and tell them what happened? If I do nothing, I will be paid for an hour that I did not...
-
Why does an auditor examine postings to employee cumulative earnings records? a. Undetected errors would accumulate across years, making subsequent payroll accounts misstated. b. Cumulative earnings...
-
There are three hospitals in the Tulsa, Oklahoma, area. The following data show the number of outpatient surgeries performed on Monday, Tuesday, Wednesday, Thursday, and Friday at each hospital last...
-
MyZ Company is an innovative company that recently invented some new technology that allows AI to work with hospital medical files on patients with severe health conditions. AI analyzes all existing...
-
Today is May 17, 2023, and you, CPA, are a Senior Tax Associate at Borden & Laurier LLP. Sylvie Condurache, Tax Manager, has called you into her office to discuss a long-time client: "I just got out...
-
Differentiate the following terms/concepts: a. DCs and DBs b. Auto-enrollment and SDIP programs c. Exponential and hyperbolic discount functions d. Deferral rate and income replacement rate
-
If employee-investors are unsophisticated and unlikely to be materially influenced by educational efforts, the best way to improve the welfare of employee-investors is pension design. Discuss.
-
Tracy is single and had adjusted gross income of $37,000 in 2018. Tracy also has the following items: Which of Tracys expenses might qualify as itemized deductions? Unreimbursed medical expenses...
-
Lucia Company has two service departments: Office and Purchasing. Total expenses for the Office is $24,000 and for Purchasing is $34,000. Expenses for the Office are allocated to operating...
-
Problem 6.9 Water flows at the rate of 400 l/s through the pipe with inlet (1) diameter of 35 cm and (2) outlet diameter of 30 cm with 4m level difference with point 1 above point 2. If P, = P, = 2...
-
Technovia, Inc. has two divisions: Auxiliary Components and Audio Systems. Divisional managers are encouraged to maximize return on investment and EVA. Manages are essentially free to determine...
-
Huron Company produces a commercial cleaning compound known as Zoom. The direct materials and direct labor standards for one unit of Zoom are given below: Direct materials Direct labor Standard...
-
Long Beach Pharmaceutical Company has two divisions, which reported the following results for the most recent year. Division I Division II Income $ 900,000 $ 200,000 Average invested capital...
-
Evaluate S: r(u, v) = ui + vj + 2vk, 0 u 1, 0 v SS f (x, y) ds.
-
Walker, Inc., is an all-equity firm. The cost of the company's equity is currently 11.4 percent and the risk-free.rate is 3.3 percent. The company is currently considering a project that will cost...
-
A small machine shop, with 30 hp of connected load, purchases electricity under the following monthly rates (assume any demand charge is included in this schedule): First 50 kw-hr per hp of connected...
-
Two automatic systems for dispensing maps are being compared by the state highway department. The accompanying breakeven chart of the comparison of these systems (System I vs System II) shows total...
-
Mr. Sam Spade, the president of Ajax, recently read in a report that a competitor named Bendix has the following relationship between cost and production quantity: c = $3,000,000 - $18,000Q + $75Q 2...
-
Townsend Produce agrees to sell 100 crates of lettuce to Metro Grocers under a shipment contract. Townsend arranges for Excel Transport to pick up and deliver the lettuce, which Excel Transport does....
-
Assume an organic compound has a partition coefficient between water and ethyl acetate equal to 8.12. If there are initially 7.10 grams of the compound dissolved in 75.0 mL of water, how many grams...
-
NO. DATE Use the table below Write a Java program that will display the output below. code may vary... For your reference QUANTITY ITEM PRICE 1 Bond Paper (rim) 230 1 Notebook 30 1 1 Printer Ink 5500...
Study smarter with the SolutionInn App