Level of interest rate, Econometrics

You have won a contest and are allowed to choose between two prizes. One option is to receive $200 now and another $200 a year from now. The second option is $150 now and $255 a year from now.

(i) At what level of interest rate (if any) is the present value of the two prizes identical?

(ii) If the actual interest rate is below the number you found in your answer above, which of the two options is characterized by higher present value? Explain.

Posted Date: 4/1/2013 3:48:39 AM | Location : United States







Related Discussions:- Level of interest rate, Assignment Help, Ask Question on Level of interest rate, Get Answer, Expert's Help, Level of interest rate Discussions

Write discussion on Level of interest rate
Your posts are moderated
Related Questions
Question: (a) Formulate a VAR with 4 lags and also rewrite it in matrix form, mentioning the limitations of such models. (b) What is the rationale behind introducing lag-dep


How will government regulation impact decision making

What is the ADF max test?

What''s the relationship between economic efficiency and technical efficiency

how to calculate equilibrium quantity and price

Profit maximization is theoretically the most sound but practically unattainable objective of business firms. In the light of this statement critically appraise the Baumol’s sales

Effective Human Resources Management Depends Upon Sound Reward System Essays and Term Papers


Suppose a small open economy is characterised by the following equations/information:             Y =6K 0 L 1-α             K 0 = 30,000             L 0 = 10,000