3. Characters in the following example: Chief actor ~ S.S.Yeung Chief actress ~ Joey Minor role ~ a pretty dog

4. Joey is a famous singer She is 22 years old Now, she has 2 ways to make money She can only choose either one of the following

5. (1) Continue to be a singer for 5 years She can gain 1 million dollars each year Then she can get 5 million dollars 5 years later

6. (2) She is paid to be the mistress of S.S. Yeung Joey can gain 6 million dollars after being his mistress for 5 years

7. Present value ~~The value now of a sum of money arising in the future. Money now is worth more than money in the future because it can be invested now to produce a greater sum in the future. Discounted value (To be a singer): Discounted value (being Yeung’s mistress): =$3790787 =$37255 28

8. As a wealth maximizer, she will choose the option which generate the largest discounted value of the income stream acquired. So she will continue to be a singer which can generate more discounted value of income.

9. However, Mr. Yeung loves Joey very much, he is thinking of how to make Joey change her decision. Interest rate Future receipt Time period

10. 1.Interest rate =$4701156 0.05 =$4329477 Present value of being a singer: Present value of being Yeung’s mistress:

11. 2. Future receipt =$3790787 Present value of being a singer: Present value of being Yeung’s mistress: 7000000 =$434644 9

12. 3. Time period Present value of being a singer: Present value of being Yeung’s mistress: =$3790787 =$4098081 4

13. In conclusion, as Mr. Yeung can’t affect the interest rate, he only can use 2 ways (shorten the time period and increase the future receipt) to make Joey change her decision. Yeah! Joey has changed her decision.