Suppose the prevailing market interest (discount) rate is 5%. Consider two students Nathan and Nick, who each have $1000 at their disposal. Both of them are guided by the prevailing discount rate but differ in their betas. Suppose Nick is more present biased than Nathan. What amount will it take in one year's time for Nathan to forego consuming the $1000? How about Nick? What do these amounts imply for their discount factor (beta*delta)?
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