If you have $2079 ten years from now in your bank account, your current purchasing power...

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If you have $2079 ten years from now in your bank account, your current purchasing power...

If you have $2079 ten years from now in your bank account, your current purchasing power is $[real] when real rate was 6%, inflation was 1.5%, and market 7.59%. How much do you have in real money?

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Answer 1

Answer #1

Real rate of Return will be used as a discounting rate.

Present Real Money = MOney after 10 years / (1+r)^n

r = 0.06

n = 10 years

= 2079 / (1+0.06)^10

= 1160.90

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Answer 2

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