1. What is the present value of $1,200 per year, at a discount rate of 8 percent, if the first payment is received 8 years from now and the last payment is received 27 years from now?
2. Suppose that the equilibrium wage in industry A is $47,000. Industry B is riskier with workers having a 7% greater chance of dying on the job; the wage in industry B is $73,000. What is the implied valuation of a life year?
3. Risk averse investors
A) Only invest in risk free bonds.
B) Require a positive risk premium to invest in equity.
C) Have CE(X) > E[X] for any risky investment X
D) Are willing to pay E[X] for any risky investment X