Chapter 1.2, Problem I.13E

If a convex function is multiplied by a negative constant, the result: A. is concave B. could be either convex or concave, depending on the value of the constant C. is convex D. is linear

Suppose on a road trip to Texas you observe that three out of every four trucks on the road are followed by a car, while only one out of every five cars is followed by a truck. What fraction of vehicles on the road are trucks?

Assume “Jane” saves $10,000 per year for 10 years starting at age 25. At age 35 she no longer is able to save but leaves her accumulated savings invested until age 65 when she retires. Assume “John” does not begin saving until age 35, but then saves $10,000 per year until age 65 when he also retires. Assume John and Jane invest their entire wealth in the same mutual fund. Who accumulates a larger retirement nest egg? 1. Answer this question by building an Excel spreadsheet that allows you to show the difference in wealth at age 65 assuming an annual rate of return of 8%. Make sure your model allows you to change the assumed rate of return and automatically recalculate the difference in wealth at age 65. 2. At what assumed rate of return are John and Jane’s wealth at age 65 equal? Use “Goal Seek” in order to find this rate of return. 3. Create a graph to clearly show how final wealth for John and Jane depends on the rate of return. Start at 0% and increase the rate of return in…