Health Economics
Health Economics
14th Edition
ISBN: 9781137029966
Author: Jay Bhattacharya
Publisher: SPRINGER NATURE CUSTOMER SERVICE
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Chapter 5, Problem 2E
To determine

IRR and the interest rate.

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Indicate whether the statement is true or false, and justify your answer.The internal rate of return is defined as the interest rate that makes the net present value of an investment stream exactly equal to zero.
Data generally show that the lifetime value of a college education is worth the cost. When is the investment in a college education not worth it? Multiple Choice When a student incurs debt with a lower real interest rate than the average annual return from earning the degree When a student does not incur debt to go to college When a student incurs debt and does not complete a degree program When a student incurs debt attending a top-ranked university and earns a degree that is in demand
John and Peter are two representative consumers/investors who maximize the utility of consumption. John's utility of consumption is characterized as ln(x) + 2ln(y) while Peter puts more weight on the current consumption level and has a utility function of 2ln(x) + ln(y). John has a wealth of ($10, $20) thousand, while Peter has a wealth of ($20, $15) thousand now and next year, respectively. (a) What are the optimal consumption plans forJohn and Peter,respectively,if the interest rate is 5% per annum? (b) If John and Peter are the only investors/consumers, what is the equilibrium interest rate? (c) Further to part (b), how much do they borrow or lend to each other?
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