True or False? You have two options, which do you prefer? With a calculator: Option 1: Calculator Method 1) Assume you want the more valuable option and assume that you've memorized (for life) the equation on page 45, Now, which option is bigger? Option 1: Option 2: $110 Option 1 is bigger. You’d prefer option 1 is preferred. True. Calculator Method 2) Alternatively, you can use the equation you know and love on page 49, calculate the ‘net-present value’ of option two. Option 1: Option 2: Worth $110 in five years Clearly the $100 today is better than the equivalent of $86 today. You prefer option 1. True. Now – Without A Calculator You should be able to look at the options and know the first option is better. Say you get option 1, you get $100 today, at 5% interest.
Making it clear Option 1 is the better of the two options. -----TRUE! |
Teaching - Curtis Kephart > Econ 100B Intermediate MacroEconomics (Homework and exam examples) >