Version:1.0 StartHTML:0000000178 EndHTML:0000003071 StartFragment:0000002356 End

Question

Version:1.0 StartHTML:0000000178 EndHTML:0000003071 StartFragment:0000002356 EndFragment:0000003035 SourceURL:file://localhost/Users/Bjo/Desktop/Summer/Quiz%25203_SP11.doc

Suppose you are asked to evaluate a policy that addresses urban smog problem in the Chicagoland area. This policy is one of the several ozone-reducing policy options evaluated using cost-benefit analysis. The policy will be implemented over a period of three years.

a) If the real benefit for each resident due to this policy is $600 at the end of each of the next three years, find the present value of benefits (PVB) in nominal terms for each resident (assuming an annual inflation rate of 3% and a nominal annual discount rate of 4%).

Explanation / Answer

(see above) that is the present value of the benefits, the payments C, is here represented by 600 the real benefit they are receiving from the policy. Now that i'm reading it, since it's asking for nominal terms, which is before inflation, I think you would just use the discount rate of 4% for i. if i'm reading it right, the inflation rate shouldn't matter

Related Questions

Navigate

• Browse (All)
• Browse V
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.