ECON 1000 Lecture Notes - Lecture 16: Time Preference, Bond Market, Risk Neutral
Document Summary
Finance- is the field that studies how people make decisions about the allocation of resources over time and the handling of risk. Just as people tradeoff one good against another, people can trade-off the same good at two different times: people always value a good today higher than they value the same good in the future a. ,100 back and the end of the year. The x in the numerator is the value in n" years. If r is the rate of growth of a variable, then the amount of time it takes for that variable to double is (approximately) 70/r years a. If r is 1%, doubling time is 70 years. If r is 3%, doubling time is 23 years c. If r is 7%, doubling time is 10 years: ex: growth in gdp, population, bank account. If i have to pay you to accept the lottery, you are risk averse.
