Scenario 15.5: Consider the Following Information Based on a Story by Hubert

question 123

Multiple Choice

Scenario 15.5:
Consider the following information based on a story by Hubert B. Herring that appeared in The New York Times on April 17, 1997:
Catherine has a two-pack-a-day cigarette habit. Cigarettes cost about $2 per pack. Catherine is 20. On a $250,000 life insurance policy, her annual premiums are $1200; a non-smoker's would be $500. Smokers earn from 4 to 8 percent less in income than non-smokers (lower productivity and more absence, among other things) . In this case Catherine's income is expected to be $20,500 per year over her lifetime whereas $22,000 is an average non-smoker's salary. Let interest rates are expected to be 3%.
-According to the information in Scenario 15.5, if Catherine's life expectancy is 80 as a non-smoker and no inflation is expected to occur throughout her life (so that cigarettes stay at $2 per pack) , then amount would she save by not buying cigarettes?

• A) $4
• B) $1460
• C) $29,200
• D) $87,600
• E) $116,800

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Definitions:

Compliance

Superficial, public and transitory change in behaviour and expressed attitudes in response to requests, coercion or group pressure.

Social Responsibility Norm

The idea that we should help people who are dependent and in need. It is contradicted by another norm that discourages interfering in other people’s lives.

Individualistic Societies

Societies that prioritize the needs and rights of the individual over those of the group or community.

Group Membership

The affiliation or identification with one or more social groups, which can influence individual attitudes, behaviors, and perceptions.