Suppose a hedge fund manager earns 1% per trading day. There are 250 trading days per year. Answer the following questions: a) What will be your annual return on $100 invested in her fund if she allows you to reinvest in her fund the 1% you earn each day?
b) What will be you rannual return assuming she puts all of your daily earnings into a zero-interest- bearing check account and pays you everything earned at the end of the year?
c) Can you summarize when it is proper to "annualize" using APR(annual percentage rate) versues EAR (effective annual rate)?

3. saving two consumers, larry and jeff, have utility functions defined over the two periods of their lives: middle age (period zero) and retirement (period 1). they have the same income in period 0 of m dollars and they will not earn income in period 1. the interest rate they face is r. larry’s and jeff’s utility functions are as follow. = 0.5 + 0.5 and = 0.5 + 0.5 for each person is between zero and one and represents each consumer’s temporal discount econ 340: intermediate microeconomics. ben van kammen: purdue university. rate. a. write the budget constraint that applies to both jeff and larry in terms of consumption in each period and ), interest rate, and m. b. what is larry’s and what is jeff’s marginal rate of intertemporal substitution? c. what is the slope of the budget constraint? d. write each consumer’s condition for lifetime utility maximization. e. re-arrange the conditions from part (d) to solve for the ratio, . f. if > which consumer will save more of his middle age income? g. if > 1 1+ , in which period will larry consume more: = 0 or = 1?