James Just Received an $8,000 Inheritance Check from the Estate

question 7

Multiple Choice

James just received an $8,000 inheritance check from the estate of his deceased rich uncle. James wants to set aside enough money to pay for a trip in five years. If the trip is expected to cost $5,000, how much of the $8,000 must James deposit now if the rate of return is 12% per year in order to have the $5,000 in five years?

• A)$2,535
• B)$2,835
• C)$2,000
• D)$5,000

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Definitions:

Prisoners' Dilemma Game

The Prisoners' Dilemma Game is a standard example of a game analyzed in game theory that shows why two rational individuals might not cooperate, even if it appears that it is in their best interest to do so.

Nash Equilibrium

A concept in game theory where no player can benefit by changing strategies if other players keep their strategies unchanged.

Maximin Strategy

A strategic choice aiming to ensure the best of the worst-case outcomes in a competitive or uncertain environment.

Pure Strategies

In game theory, strategies that involve making a specific choice or action with certainty, as opposed to mixed strategies where actions are chosen probabilistically.