Risk averse investors, What is the present value of $1,200

Risk averse investors

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Reference no: EM131963672

1. What is the present value of $1,200 per year, at a discount rate of 8 percent, if the first payment is received 8 years from now and the last payment is received 27 years from now?

2. Suppose that the equilibrium wage in industry A is $47,000. Industry B is riskier with workers having a 7% greater chance of dying on the job; the wage in industry B is $73,000. What is the implied valuation of a life year?

3. Risk averse investors

A) Only invest in risk free bonds.

B) Require a positive risk premium to invest in equity.

C) Have CE(X) > E[X] for any risky investment X

D) Are willing to pay E[X] for any risky investment X

Reference no: EM131963672

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