« previous next »

Author Question: You have won a contest and are allowed to choose between two prizes. One prize is 200 today and ... (Read 88 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?

In inpatient settings, adverse drug events account for an estimated one in three of all hospital adverse events. They affect approximately 2 million hospital stays every year, and prolong hospital stays by between one and five days.

Did you know?

The human body's pharmacokinetics are quite varied. Our hair holds onto drugs longer than our urine, blood, or saliva. For example, alcohol can be detected in the hair for up to 90 days after it was consumed. The same is true for marijuana, cocaine, ecstasy, heroin, methamphetamine, and nicotine.

Did you know?

The use of salicylates dates back 2,500 years to Hippocrates’s recommendation of willow bark (from which a salicylate is derived) as an aid to the pains of childbirth. However, overdosage of salicylates can harm body fluids, electrolytes, the CNS, the GI tract, the ears, the lungs, the blood, the liver, and the kidneys and cause coma or death.

Did you know?

When blood is deoxygenated and flowing back to the heart through the veins, it is dark reddish-blue in color. Blood in the arteries that is oxygenated and flowing out to the body is bright red. Whereas arterial blood comes out in spurts, venous blood flows.

Did you know?

You should not take more than 1,000 mg of vitamin E per day. Doses above this amount increase the risk of bleeding problems that can lead to a stroke.

Happened to me today. Happened to me today.
The Sun Today and as a Giant The Sun Today and as a Giant
Many households today include young adults who have not moved out of their parents’ homes (or who ... Many households today include young adults who have not moved out of their parents’ homes (or who ...
Teaching Today's Health, 10th Edition Teaching Today's Health, 10th Edition
Math Contest Question Math Contest Question
The Rocket Contest Grade 1 Reading The Rocket Contest Grade 1 Reading
Video: Glycolysis - and oxygen

For a complete list of videos, visit our video library