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Present Value

  • Thread starter oswald
  • Start date
22
0
1. Homework Statement
What is the permanent income that corresponds to present value of the two period income path Y 1 =100, Y 2 =125 for the real interest rate r=.5? (Note: 50% not ½%!)



2. Homework Equations

PV = Y1 + Y2/(1+r)^t

3. The Attempt at a Solution


Correct Answer:

a) 110

I did Pv = 100 + 125/1,5 = 183, but the answer is 110!?
 

Answers and Replies

22
0
i found the anser, it s the definition

1+r/2+r x y1 + y2/1+r !

its 109,8
 

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