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Adwoa's friend tells her that 2001: A Space Odyssey is good. Adwoa is trying to decide between reading the book and watching the movie. Assume that the movie yields an immediate utility of 1 in the single period (single day) during which Adwoa watches it, and a utility of 0 thereafter. Assume that the book yields a utility of 0.1 for each of 100 periods during which she reads it, and a utility of 0 thereafter. Adwoa's utility function at time ? is ??=?(??)+?∑∞?=?+1???(??) , representing the fact that she discounts the utility of future consumption. First, suppose that ?=0.5 and ?=0.92 .


What is Adwoa's present value of seeing the movie tomorrow (one period from now)? What is Adwoa's present value of reading the book. starting tomorrow (one period from now)?

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