1. Your grandmother has told you she can either give you $4,800 now or $5,500 when you graduate from college in three years. Your savings account earns 4% interest, compounded annually. Which option would be worth more to you now, and how much more? (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor from the PV tables. Round your final answer to 2 decimal places.)
a. The $5,500 in the future is worth $89.50 more than the $4,800 now.
b. The $4,800 now is worth $89.50 more than the $5,500 in the future.
c. The $5,500 in the future is worth $100.00 more than the $4,800 now.
d. The $4,800 now is worth $100.00 more than the $5,500 in the future.
2. The tendency of naive investors to buy high? (after prices have risen for several? periods) and sell low? (after prices have dropped for several? periods) can be explained by the behavioral tendency known as
A. familiarity bias.
B. overconfidence.
C. anchoring.
D. loss aversion.