The lottery this evening is worth $50 million dollars in your state. There are two people in your neighborhood that are buying lottery tickets. One is a student with little financial knowledge or business acumen
The other is a successful entrepreneur that is earning 20% rate of return on his business. Which of these people is likely to check off the "cash" option on the ticket and which is likely to choose the structured payout and why?
It is more likely that the entrepreneur will choose the cash option because he can invest this money in his business and earn a handsome return. The present discounted value of the structured payout is likely to be less than the cash option. Just the opposite is likely to be true for the student.
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Refer to Figure 33-2. If the economy starts at A, a decrease in the money supply moves the economy
a. to A in the long run
b. to C in the long run
c. back to A in the long run
d. to D in the long run
Refer to the scenario above. You should use ________ to make your decision
A) backward induction B) forward induction C) mixed strategies D) your dominant strategy