character 1 ) nicholas tse assume that he is a wealth maximizer, he will choose a girlfriend that...

Character 1 ) Nicholas Tse

Assume that he is a wealth maximizer ,

he will choose a girlfriend that can generate the highest future income .

The rice is so soft ~

2) Faye Wong

A divorced woman with a 6-year-old daughter ,Tong Tong.

Her annual income will be 2 million per year

3) Cecilia Cheung Famous Single-

singer, as she is

less famous now ,

her annual income

will be 1 million per year .

Relationship

I will choose the one who can earn mo

re $$

Assume that Nicholas will choose the one who will generate more future income ,and he will be with the girl for 10 years . Now ,we discount the future income of Cecilia and Faye into present value first .

Interest rate :10% /year

Present value of receiving a constant amount at the end of each year for finite number of years .

Y Y Y Y

————+ ——— + ——— + ……… ——— (1+r)¹ (1+r)² (1+r)³ (1+r)ⁿ

Y 1

= ——— [ 1 ― ————] r (1+r)ⁿ

* n = time (number of year)

Cecilia will earn 1 million per year , and she will work for 10 years. So the present value of her future income is :

1 million 1 —————— [ 1 ─ —————— ] = $6144567 10% (1+10 %)¹º

Faye Wong will earn 2 million per year ,and she will work for 10 years.So the present valueof her future income is :

2 million 1 ───── [ 1 − —————— ] = $12289134 10% (1+10 %)¹º

Mum , We have a happy

family again ~

Wait ~ Honey ~ Don’t forget she has a daughter !!!

Dad ~

But there is a point that Faye has a daughter, Tong Tong and she will spend Faye’s income.

Tong Tong will spend $ 1200000 per year , and she will spend Faye’s income for 10 years.

So , as Tong Tong will spend $1200000 /year ,the present value of Faye´s future income will decrease

2 million 1

───── [ 1 ─ ───── ] - Tong Tong’s expenditure 10% (1+10 %)¹º

2 million 1 $1200 000 1

= ───── [ 1 − ────── ] − ────── [ 1 − ───── ]

10% (1+10 %)¹º 10% (1+10 %)¹º

=$12289134 −$7373480

=$ 4915654

And Cecilia’s future income ( in terms of present value) remains constant

= $6144567

But Faye’s future income( in terms of present value ) decreases

=$ 4915654 So Nicholas will choose Cecilia now ~

I love You too , Cecilia ~ because you got more money …HaHa

I win ~

Fung Fung I love You!!

We will go back to Beijing ~

Sorry , Mum

By Irene (10) & Cecilia (17)

The End