Sue is an exponential discounter. her discount function, Ask an Expert

Finance

Sue is an exponential discounter. Her discount function which illustrates her preference for money at various points in time is characterized as follows: (t) = 1/(1.07)^t for t = 0,1,2, ... Bob on the other hand is a hyperbolic discounter. His discount function is: (t) = 1 for t = 0 = .8/(1.03)^t-1 for t = 1,2, ...

a. What would Sue/Bob rather have: $1 today or $1.10 next year? describe.
b. What would Sue/Bob rather have: $1 next year or $1.10 the year after that? describe.

View complete question

Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M926062

Have any Question?Write your Review or question?

Related Questions in Basic Finance

For the year just concluded free cash flow to equity fcfe

For the year just concluded, Free Cash Flow to Equity (FCFE) is 100 million. FCFE grows at 10% annually for the next three years, and then is constant (grows at 0%) per year thereafter. The required rate of return on equ ...

What would be examples of valid selection methods used by

What would be examples of valid selection methods used by the human resource department to ensure selecting the appropriate candidate for a job.

Grant technologies needs 300000 to pay its supplier grants

Grant Technologies needs $300,000 to pay its supplier. Grant's bank is offering a 210-day simple interest loan with a quoted interest rate of 11 percent and a 20 percent compensating balance requirement. Assuming there a ...

If you pay 55 for a share of common stock that has a

If you pay $55 for a share of common stock that has a constant growth rate of 6% and it is expected to pay a dividend of $1.25 what would be your return (hint: solve for kc and be careful about the dividend - it has alre ...

Suppose you expect to rent a house when you retire in 35

Suppose you expect to rent a house when you retire in 35 years. Today, rent for a 3 bedroom, 2 bathroom home costs $36,000 per year. You expect inflation to be 2% per year between now and when you die and that rent will ...

Suppose you want to raise 15m for a new machine you plan to

Suppose you want to raise $15m for a new machine. You plan to raise the funds by selling 20-year $1,000 bonds with a semi-annual coupon rate of 5% and 8% yield. Before putting the bonds to market, inflation drops half a ...

The owner of a hardware store in eureka ca is interested in

The owner of a hardware store in Eureka, CA is interested in measuring customers satisfaction of the people that buy something into her store. Which survey research data collection method would you recommend? Why? What a ...

What is the exploration of the effect on npv of changing

What is the exploration of the effect on NPV of changing multiple project parameters called?

Please provide formulawhat is the present value of a 128

Please provide formula What is the present value of a $128 perpetuity discounted back to the present at 9.38 percent.

Common stock versus warrant investment tom baldwin can

Common stock versus warrant investment Tom Baldwin can invest $6,300 in the common stock or the warrants of Lexington Life Insurance. The common stock is currently selling for $30 per share. Its warrants, which provide f ...

4,153,160 Questions Asked
13,132 Experts
2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Recent Questions

Ask Basic Finance Expert