Heyyy economics problem helpppppp!!!!!!!?

Question

You have just been informed that you have 2 years to live and are considering a night of debauchery to take your mind off the news. The consequence of such behavior is eternal damnation, beginning on the date of your death. One year of fire and brimstone is equal in unpleasantness to the loss of $10000. The intrest/ discount rate is 10 %.

a.) How pleasant would a night of sin have to be in order to be worth the cost?

b.) Which is more likely to deter you from sinning: a doubling of the torments of the underworld or a halving of the interest rate?

Answer 1

perpetuity PV of h**l at date of death:

-10K/0.1 = -100K

pv 2 years before you die:

-100K/1.1^2= -100K/1.21 = do the math

b) doubling of torments.

effect on perpetuity will be same, but interest rate will have less impact on 2-year pv factor