ECON 102 Quiz 3 (ECON_102)

ECON 102 Quiz 3 Last document update:   ago

ECON 102 Quiz 3. Suppose that the real return on assets is 4% forever. Approximately what is it worth to have a gift from your grandparents when you are young that pays $2000 a year until you die: a. About $2,000 b. About $5,000; c. About $120,000 if you expect to live for another 60 years; d. About $20,000 e. About $8,000 f. About $50,000 Solution: The present value of the sum of all money to be received in the future on this “perpetuity” is given by $2,000 / 0.04 = $50,000 2) Ac...