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Unformatted text preview: g NPV @T = 4 5 : 2 R & 4 T ln R & 20 R T ln R = 0 Its just plain algebra after this: 5 R T = 5 : 2 R & 4 T R 5 T = 1 : 04 5 T = ln 1 : 04 ln R T = ln 1 : 04 5 ln (1 + 0 : 00026116) = 30 : So we will be hoarding tokens for 30 days, or from December 2 until December 31. In case you are wondering, hoarding for 30 days gives NPV = $11 : 97 . You could check by hand to make sure that it doesnt make sense to be buying any tokens (not even one) on December 1. If we buy one token on December 1: FV ( Cost ) = 2 : 5 (1 + 0 : 00026116) 31 = 2 : 5203 The present value of the bene&t it gives you is less than this cost: PV ( Benefit ) = 2 : 6 (1 + 0 : 00026116) 30 4+1 = 2 : 5191 By contrast, you can verify that the &rst token we buy on December 2 has a positive NPV : 2 : 6 (1 + 0 : 00026116) 30 4 & 2 : 5 (1 + 0 : 00026116) 30 = 2 : 5198 & 2 : 5197 = 0 : 0001 > :...
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This note was uploaded on 12/20/2011 for the course RSM 332 taught by Professor Raymondkan during the Fall '08 term at University of Toronto Toronto.
 Fall '08
 RAYMONDKAN

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