1. Present value and future value. a. Assume the interest rate is equal 10%. Let...
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1. Present value and future value. a. Assume the interest rate is equal 10%. Let the initial capital (at the beginning of present period : t = 0, K o ) be 75$. Calculate the (future) value K 4 = FV(K o ) (of capital at the beginning of 4-th period) b. Assume the interest rate is equal 20%. Let capital K 4 (at the beginning of the 4-th period ( t = 4) be 100 $. Calculate the present value K o = PV(K 4 ) (of capital at the beginning of 0-th period) c. Calculate the PV( S) of finite stream of flows S =(40, 50,60,70,80) occurring at the beginnings of periods 0,1,2,3,4 when interest rate r= 0.2. 2. Determining inter-temporal budget constraint, when real (external) interest rate is r >0 (r =0.1), and initial recourses (stream of incomes in two periods , respectively) is (X,Y) = (30,40) 3. Calculate elasticity of function f(x) = x -3 at point x = 8
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