Investment Time And Endurance Flashcards
How do you account for time in economics
By comparing with compounded interest or using present discount value
What is net present value
Sums the costs and benefit of the present value of an in devour to see if it is worth undertaking
What is a payback period of an investment
The time it takes for an investment to be worth it
What is real nominal and equilibrium interest rate
Real accounts for inflation nominal does not and equilibrium is the rate that leads to must utility for the market.
What is the option value if waiting when investing
An alternative that eliminates risk when putting of the investment
Is a risk averse person indifferent between earnings and volatility
No they need to be thoroughly compensated for the risk thy take
How can insurance provide utility for a risk averse person
Because they dislike risk by a monetary amount
Why foes insurances need to be diversified
So that the ensurer dies not have to pay all at once
