Suppose an individual faces a decision of whether or not to make an investment 2 years from now.The investment will cost $10,125, and it will yield a benefit b 2 years later.
a.Suppose the individual treats a dollar 1 year from now the same way as $0.90 now.How low can b be for this individual to plan to make the investment in two years?
b.Now suppose that the individual's tastes are better characterized by the beta-delta model.Suppose delta is 0.9.For what values of beta will the individual plan the same course of action 2 years from now as he would in the typical delta model (with the same delta)?
c.Suppose beta is 0.9 (with delta also equal to 0.9).How low can b be in order for the individual to be willing to undertake the investment when he faces the choice in 2 years?
d.For what range of values for b does the individual from (c) plan to undertake the investment but then decides not to when the time comes?

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The Answer of Suppose an individual faces a decision of whether or not to make an investment 2 years from now.The investment will cost $10,125, and it will yield a benefit b 2 years later.
a.Suppose the individual treats a dollar 1 year from now the same way as $0.90 now.How low can b be for this individual to plan to make the investment in two years?
b.Now suppose that the individual's tastes are better characterized by the beta-delta model.Suppose delta is 0.9.For what values of beta will the individual plan the same course of action 2 years from now as he would in the typical delta model (with the same delta)?
c.Suppose beta is 0.9 (with delta also equal to 0.9).How low can b be in order for the individual to be willing to undertake the investment when he faces the choice in 2 years?
d.For what range of values for b does the individual from (c) plan to undertake the investment but then decides not to when the time comes?

Suppose an Individual Faces a Decision of Whether or Not