tag:blogger.com,1999:blog-14858768.post7307882224818386569..comments2012-05-11T19:47:19.551+08:00Comments on Rational Choice: Thanks to my commentators and pop quizRoehlano Brioneshttps://plus.google.com/101629923234159467114noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-14858768.post-65914874466406130232009-08-01T00:58:55.107+08:002009-08-01T00:58:55.107+08:00Ok, you said "net" PV. That means you h...Ok, you said "net" PV. That means you have to account for the income stream from the fact that the State owns certain resources -- roads, mountains, foreign exchange of the central bank, oil or gas in the ground. Surely, the value of all that must have an income stream greater than $60 per resident, which would even out the debt of somewhat less than $1,000 (assuming 6% discount rate). The resident is in fact "ahead" and not behind, so there is no net debt that needs to be paid off. Hence, net PV of debt is probably negative.Orlando Roncesvalleshttp://www.blogger.com/profile/15787159826210287420noreply@blogger.comtag:blogger.com,1999:blog-14858768.post-53961243896108392362009-03-11T17:33:00.000+08:002009-03-11T17:33:00.000+08:00ASSUMPTIONS1. Suppose that I expect to pay off my ...ASSUMPTIONS<BR/><BR/>1. Suppose that I expect to pay off my share of the national debt burden during this lifetime (say, during my 40 productive years from age 20 to age 60).<BR/>2. I put some money into an investment vehicle that earns 6% annually, net of tax. I shall use the future proceeds to pay off my share of the national debt burden.<BR/>3. Suppose that after working for 40 years, my investment will grow to P43,805.00, which is given as the average debt burden of each individual today.<BR/><BR/>COMPUTATION<BR/><BR/>To get the present value of P43,805.00 at 6% annual interest over 40 years, apply the formula: FV = PV(1+r)^t, where FV = future value, PV = present value, r = interest rate, t = time. Using algebra, we get: PV = FV/(1+r)^t.<BR/><BR/>So, we proceed as follows:<BR/><BR/>PV = P43,805.00/(1+0.06)^40<BR/>PV = P43,805.00/10.28571794<BR/>PV = P4,258.82<BR/><BR/>So, to have enough money to pay off the P43,805.00 I owe to the government, I must invest P4,258.82 today and leave it to grow at 6% yearly during my 40-year productive period.Ser Percival K. Peña-Reyesnoreply@blogger.com