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final hw assignment - 3 I would say this is an externality...

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Ryan Hayes Prof Elliott 1. In the most desirable way, I would invest nothing into fund B since everyone is contributing to the maximum, and put all my money in fund A since I get the most out of my money $42. 2. I would probably not follow this strategy in the real world, because in the long term I would much rather receive interest than nothing, although I would still keep a little bit in fund A so I don’t lose everything if something would go wrong in fund B.
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Unformatted text preview: 3. I would say this is an externality market failure at least for fund B, because we do not know the long term benefit of the interest rate. It can be really high one day, and then take an ugly turn, which would cause a loss in investment. So overall, I would put a little bit in A and be careful on the amount I put in B so I don’t lose all my money in that fund....
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