« previous next »

Author Question: You have won a contest and are allowed to choose between two prizes. One prize is 200 today and ... (Read 44 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?

According to the Migraine Research Foundation, migraines are the third most prevalent illness in the world. Women are most affected (18%), followed by children of both sexes (10%), and men (6%).

Did you know?

Allergies play a major part in the health of children. The most prevalent childhood allergies are milk, egg, soy, wheat, peanuts, tree nuts, and seafood.

Did you know?

Inotropic therapy does not have a role in the treatment of most heart failure patients. These drugs can make patients feel and function better but usually do not lengthen the predicted length of their lives.

Did you know?

According to animal studies, the typical American diet is damaging to the liver and may result in allergies, low energy, digestive problems, and a lack of ability to detoxify harmful substances.

Did you know?

Adult head lice are gray, about ? inch long, and often have a tiny dot on their backs. A female can lay between 50 and 150 eggs within the several weeks that she is alive. They feed on human blood.

The Land Ordinance of 1785 called for surveying and dividing the Western Territories into square mil The Land Ordinance of 1785 called for surveying and dividing the Western Territories into square mil
Children will feel more at ease and have a better learning experience if they are allowed to touch ... Children will feel more at ease and have a better learning experience if they are allowed to touch ...
Throughout history, technology has had an impact on families. Today is no exception. Throughout history, technology has had an impact on families. Today is no exception.
Selling Today: Partnering to Create Value (Manning/Ahearne/Reece) Selling Today: Partnering to Create Value (Manning/Ahearne/Reece)
Psychology for Living: Adjustment, Growth, and Behavior Today 11th Psychology for Living: Adjustment, Growth, and Behavior Today 11th
The net price of an article is $79.84. What is the list price if a discount of 23% was allowed? The net price of an article is $79.84. What is the list price if a discount of 23% was allowed?
Video: B cells and antibodies

For a complete list of videos, visit our video library