Question

Your rich aunt is going to give you an end-of-year gift of $1,100 for each of the next 10 years. a. If general price inflation is expected to average 6% per year during the next 10 years, what is the equivalent value of these gifts at the present time? The real interest rate is 5% per year. b. Suppose that your aunt specified that the annual gifts of $1,100 are to be increased by 6% each year to keep pace with inflation. With a real interest rate of 5% per year, what is the current PW of the gifts? Click the icon to view the interest and annuity table for discrete compounding when i = 5% per year. a. The PW of the gifts is $ (Round to the nearest dollar.) b. The PW of the gifts is $ . (Round to the nearest dollar.)

Answer 1

Kindly upvote:)

= 0.113 = 11:31 CON MAIR. im-int ft (un) (8) = (0.os) + (0.06) + (0.0sf Co-ob) PW = $1100. (PIA, 11.31., 10) (11.3+) & 1100 1 (1+0) N.-17 01.30.) $1100 L ti) J I to 113) 0 - 1 . $11000. 5.816) $ 100 [ 0 ") Film = $16397 = $1100 (sto. of to value e Annual actual Real annual rake R = 1100 (atoros) (PIF, 61,10) = 1100 (1tootho ( 170.060) - 1100 Pw(st.) = $1,600 CP (A, SJ., 10). - $ 100 (letoros) -) = ons (ators 10 nou (7.42) - $8494]