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4 pages/≈1100 words

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2 Sources

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APA

Subject:

Mathematics & Economics

Type:

Math Problem

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English (U.S.)

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# Risk and Uncertainty in Economics (Math Problem Sample)

Instructions:

economics calculation

source..Content:

Risk and uncertainty in economics

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Affiliated Institute

Date

Risk and uncertainty in economics

The value of the second alternative is analyzed below:

The formula for finding the present value based on the future is provided by

The Future Amountâ€™s PV=A(1+r)n

A represents the amount of annuity while r is the opportunity rate of interest and in the period of years when the amount was received. Basing on this fomularae, the present value of the second alternative can be found by adding the future amount of the two years.

Therefore, present value=

700000(1+0.08)1 + 700000(1+0.08)2 = $(6, 481,481.48+6,001,371.74)

$ 12, 482, 853.22

Since the amount provided in one lump sum was only12 million, the second alternative appears to be the best option since it avails students with 12.482 million dollars which is 0.482 more that the lump sum provided in the initial scholarship.

B

Since the new opportunity rate of interest is 12 percent, the calculation will be modified so as to show the variance of the newly provided parameter.

Therefore, the second alternative can be calculated by

700000(1+0.12)1 + 700000(1+0.12)2 = $(6, 250, 000 + 5,580,357.14)

=11.83 million dollars.

Since the amount provided in one lu...

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