Assume That You Inherited Some Money

question 61

Multiple Choice

Assume that you inherited some money.A friend of yours is working as an unpaid intern at a local brokerage firm,and her boss is selling some securities which call for four payments,$50 at the end of each of the next 3 years,plus a payment of $1,050 at the end of Year 4.Your friend says she can get you some of these securities at a cost of $900 each.Your money is now invested in a bank that pays an 8 percent simple (quoted) interest rate,but with quarterly compounding.You regard the securities as being just as safe,and as liquid,as your bank deposit,so your required effective annual rate of return on the securities is the same as that on your bank deposit.You must calculate the value of the securities to decide whether they are a good investment.What is their present value to you?

• A) $1,000
• B) $866
• C) $1,050
• D) $901
• E) $893

Assess the effects of various types of insurance policies on individual behavior.

Understand the role of incentives and monitoring in mitigating moral hazard.

Recognize the importance of screening and selection processes to prevent shirking.

Analyze decision-making processes in the context of public health emergencies.

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Definitions:

Major Depression

A psychological condition marked by a constant state of sadness or a lack of enthusiasm in tasks, resulting in considerable disruption to daily functioning.

Systematic Desensitization

A behavioral therapy technique aimed at reducing phobic or anxiety responses by gradually exposing the patient to the feared object or situation.

Shaping

A method of teaching new behaviors by using reinforcement of successive approximations to the desired behavior.

Social Anxiety

A chronic mental health condition characterized by significant anxiety or fear of being judged, negatively evaluated, or rejected in a social or performance situation.