There is a well-known experiment:Participants are supposed tochoose whether they would prefer, $100 in a month or $90 now. In a second question, they are asked to choose between $100 in a year or $90 in 11 months.

a. What is the monthlyinterest rate in this question?

b. What is the effective annual rate?

c. Peoplemostly choose $90 now in the first question and $100 in a year in the second question. What does it mean? What kind of implications does it have for our financial decisions?