« previous next »

Author Question: You have won a contest and are allowed to choose between two prizes. One prize is 200 today and ... (Read 43 times)

MirandaLo

  • Hero Member
  • *****
  • Posts: 538
on: Jul 1, 2018
You have won a contest and are allowed to choose between two prizes. One prize is 200 today and another 200 one year from now. The other prize is 100 today and an additional 325 one year from now.
 
  At what interest rate (if any) would you be indifferent between the two prizes?

Question 2

Refer to Scenario 10.2. What is the profit maximizing level of output?
 
  A) 0
  B) 90
  C) 95
  D) 100
  E) none of the above


lgoldst9

  • Sr. Member
  • ****
  • Posts: 372
Reply #1 on: Jul 1, 2018
Answer to Question 1

Prize 1 has PDV = 200 + 200/(I + R)
Prize 2 has PDV = 100 + 365/(I + R)
Equating the PDV for prize 1 and prize 2 and solving for R yields:
200 + 200/(l + R) = 100 + 365/(l + R)
R = 0.25

Answer to Question 2

C


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
« previous next »
 

Did you know?

Critical care patients are twice as likely to receive the wrong medication. Of these errors, 20% are life-threatening, and 42% require additional life-sustaining treatments.

Did you know?

There are 60,000 miles of blood vessels in every adult human.

Did you know?

Asthma is the most common chronic childhood disease in the world. Most children who develop asthma have symptoms before they are 5 years old.

Did you know?

Tobacco depletes the body of vitamins A, C, and E, which can result in any of the following: dry hair, dry skin, dry eyes, poor growth, night blindness, abscesses, insomnia, fatigue, reproductive system problems, sinusitis, pneumonia, frequent respiratory problems, skin disorders, weight loss, rickets, osteomalacia, nervousness, muscle spasms, leg cramps, extremity numbness, bone malformations, decayed teeth, difficulty in walking, irritability, restlessness, profuse sweating, increased uric acid (gout), joint damage, damaged red blood cells, destruction of nerves, infertility, miscarriage, and many types of cancer.

Did you know?

Patients who have been on total parenteral nutrition for more than a few days may need to have foods gradually reintroduced to give the digestive tract time to start working again.

The research methods that sociologists choose depend partially on the questions they want to answer. ... The research methods that sociologists choose depend partially on the questions they want to answer. ...
How to choose the right payment plan with changing conditions (Question 4) How to choose the right payment plan with changing conditions (Question 4)
How to choose the right payment plan with changing conditions (Question 5) How to choose the right payment plan with changing conditions (Question 5)
For each substrate below, choose which reaction type is favored. Place the letter of the ... For each substrate below, choose which reaction type is favored. Place the letter of the ...
I NEED IT FOR TODAY PLEASE 14 QUESTIONS I NEED IT FOR TODAY PLEASE 14 QUESTIONS
"The Department of Agriculture came out today with its prediction for food price "The Department of Agriculture came out today with its prediction for food price
Video: Olfaction. or the sense of smell

For a complete list of videos, visit our video library