Entries by Hannah Wangui

A person plans to save $1 for 20 years. They can invest at an annual rate of 10% (r= 0.1)

November 27, 2020 in /by

A person plans to save $1 for 20 years. They can invest at an annual rate of 10% (r= 0.1). This investment opportunity “compounds annually” (meaning that they receive interest payments at the end of each year). A second investment opportunity pays a return of ̃r × 100%, compounded every decade. (After one decade, the […]

 

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This exercise adopts the common meaning of “rent”, to denote the payment made to be able to use something (here, land) for a given amount of time (here, one year)

November 27, 2020 in /by

This exercise adopts the common meaning of “rent”, to denote the payment made to be able to use something (here, land) for a given amount of time (here, one year). The exercise illustrates: (i) how rent is determined in a competitive market, (ii) the relation between land, rent, and land price, and (iii) the distinction […]

 

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According to the Baumol-Tobin model of cash management the combined opportunity and transaction cost of holding currency is C= FN + i Y/2N -Differentiate C with regards to N -Find the 1st order condition for the optimal value of N, that is N* -Check the 2nd order condition to confirm that total costs are minimized at N*

November 27, 2020 in /by

According to the Baumol-Tobin model of cash management the combined opportunity and transaction cost of holding currency is C= FN + i Y/2N -Differentiate C with regards to N -Find the 1st order condition for the optimal value of N, that is N* -Check the 2nd order condition to confirm that total costs are minimized at N*   […]

 

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You are bidding against one other bidder in a first-price sealed-bid auction with private values.

November 27, 2020 in /by

You are bidding against one other bidder in a first-price sealed-bid auction with private values. You believe that the other bidder’s valuation is equally likely to lie anywhere in the interval between $0 and $500. Your own valuation is $200. Suppose you expect your rival to submit a bid that is exactly one half of […]

 

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