say you won 10 GBP and you had the option to delay the win for 1, 2, 3, 5 or 10 years. How much would you like in those respective years? I need this data for an economic experiment.
An example:
1 year: 11 GBP
2 years: 13 GBP
3 years: 15 GBP
5 years: 20 GBP
10 years: 50 GBP
2006-10-23 08:23:15 · 8 answers · asked by Dirk N 3 in Social Science ➔ Economics
It is called Liquidy Preference to want your money early. The needier you are, the more eager you are to have it sooner so the higher is the return that you need if you are asked to postpone it. But it is all relative. I would lend you my money, say up to £1000 (same thing as winning money) at maybe Libor + 5%, so about 10% per annum (assuming I am pretty sure you will give it back). So 1y: 1100 pounds, 2y 1210 pounds, ... , 10y would be 1000* (1.10)^10.
Now if you ask me how much I would lend you £10,000, I would be more hesitant. That could mean that I have to postpone buying a new car, which would be a pain. I would charge you an "inconvenience" premium, say another 2% per annum. So then I would want 10,000 * (1.12)^T (if you follow me..).
I think you will find that many people will lend you money for a short while at a low interest rate but want a higher return if they have to wait longer. The risk that you run away with the money also increases when the term is longer.
Good luck with your experiment!
2006-10-23 09:15:44 · answer #1 · answered by Thou Shalt Not Think 3 · 0⤊ 0⤋
I guess you're asking me what my tolerated interest rate is?
Around 40%pa, which is about the return I get on my business. So in the example above i'll have the money now, thanks.
BTW, this question works better with a larger sum like £10,000 or even £100,000; people aren't really bothered about a couple of quid difference for the hassle of remembering about it for years. If you gave me £10 now or £20 in a year i'd take the tenner. £100,000 now or twice as much in a year, i'd wait.
2006-10-23 09:52:58 · answer #2 · answered by wimbledon andy 3 · 0⤊ 0⤋
I would like 2yrs @13 GBP send it on down {smile}
2006-10-23 08:26:47 · answer #3 · answered by Sugar 7 · 0⤊ 0⤋
I think I'd like the £10 now please.
The interest rates are a bit low on your schemes.
2006-10-23 08:33:46 · answer #4 · answered by Solow 6 · 0⤊ 0⤋
as a poor student who will hopefully have a good career later on, i would take the 10 now
2006-10-26 03:13:35 · answer #5 · answered by mr. me 3 · 0⤊ 0⤋
How much are you willing to come off of?
2006-10-23 08:25:26 · answer #6 · answered by Anonymous · 0⤊ 0⤋
all that you have, thank you.
2006-10-23 08:26:04 · answer #7 · answered by Zippy 7 · 0⤊ 0⤋
alot more than those amounts ..thanks
2006-10-23 08:26:49 · answer #8 · answered by Anonymous · 1⤊ 0⤋