If an individual discounts delayed utils with a weight of 1/4,the present value of 90 utils to be received after a year is ________ utils.

Question

Quizplus · Accepted Answer

To find the present value of delayed utils, we need to use the formula:
PV = FV / (1 + r)^n

Where PV is the present value, FV is the future value, r is the discount rate, and n is the number of periods.

Here, the future value is 90 utils, and we need to discount it using a weight of 1/4. So the effective discount rate is 25%. The time period is 1 year.

Plugging these values in the formula, we get:
PV = 90 / (1 + 0.25)^1
PV = 90 / 1.25
PV = 72

So the present value of 90 utils to be received after a year, discounted with a weight of 1/4, is 72 utils.

If an Individual Discounts Delayed Utils with a Weight of 1/4,the