× Didn't find what you were looking for? Ask a question
Top Posters
Since Sunday
w
3
w
3
e
3
3
r
3
g
2
2
b
2
M
2
V
2
f
2
c
2
Home Q & A Board Other Fields Homework Help Business Economics
New Topic  
nakungth nakungth
wrote...
Posts: 1175
Rep: 3 0
7 years ago
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?
Textbook 
Microeconomics

Microeconomics


Edition: 8th
Author:
Read 107 times
1 Reply

Related Topics

Replies
wrote...
#1
7 years ago
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
New Topic      
Quick Reply
Explore
Post your homework questions and get free online help from our incredible volunteers
  575 People Browsing
 130 Signed Up Today
Start New Topic Take the Tour CoursesNew Study Tools Topics Trending Browse by Textbook
Live Chat
Related Images
  
 122
  
 325
  
 690
Your Opinion
Who will win the 2024 president election?
Votes: 119
Closes: November 4
Previous poll results: Which is the best fuel for late night cramming?