Solution
a) Real interest rate = Nominal Interest Rate - Inflation Rate
= 5 - 2 i.e., 3% per year
b.(i) Actual / or then current dollars
Time = 5 years ; Principal = $10,000 ; Nominal Rate of interest (r) = 5 % per year ; Maturity Amount = ?
Amount =10,000 ((1+ (r/100)) ^ n)
= 10,000 ( 1.05 ^ 5) i.e., $12,762.81
(ii) Real / Constant dollars
Here the calculation remains the same but instead of the Nominal interest rate we need to take the real interest rate into the consideration
Amount =10,000 ((1+ (r/100)) ^ n)
= 10,000 ( 1.03 ^ 5) i.e., $ 11,592.74
Hope this solution helps!! Please give a "Thumbs Up " rating for this solution !!
3) (15 points) A local credit union pays a market interest rate of 5% per year...
Olivia deposited $800 at her local credit union in a savings account at the rate of 6.2% paid as simple interest. She will earn Interest once a year for the next 7 years. If she were to make no additional deposits or withdrawals, how much money would the credit union owe Olivia in 7 years? O $1,218.88 $852.68 $1,147.20 $149.60 Now, assume that Olivia's credit union pays a compound interest rate of 6.2% compounded annually. All other things being equal,...
1. Calculate the real interest rate per annum using the full Fisher equation if the nominal interest rate is 6% per annum and the inflation rate is 2% per annum. A. 3.92% B. 4.00% C. 8.00% D. 8.12% 5. Calculate the simple interest rate per to a nominal interest rate of 4% compounded monthly over a 24 period. A. 3.33% B. 4.00% C. 4.16% D. 6.67% 6. Michael made a deposit of $13,000 exactly 5 years ago into an account...
dont use excel solve step by step 5. An investor deposits $100 into his credit union account that pays interest at the rate of 3.25% per year (payable at the end of each year). He leaves the money and all accrued interest in the account for 7 years. How much will he have at the end of the 7 years?
1. What is the interest earned from a savings of P10,000 at a simple interest rate of 107 per year for 5 years? (5 points) 2. How long does a man need to invest P5,000 to be P9,000 at an interest rate of 10 compounded annually? (5 points) 3. What is the rate of interest, compounded monthly charged to an investment of P2 000 that pays P1, 205 per month for 2 years. (5 points) 4. How much annual deposit...
assume the inflation rate 6% per year and the real interest rate is 5%. A)the number of future dollars after 5 years that will be equivalent to 30000 calculating first real dollar equivalence (constant value dollars) B) The number of future dollars after 5 years that will be equivalent 30000 market interest rate ?
in your savings account, and your bank pays interest at a rate of 0 54% per month. If you make no further deposits or withdrawals, how much will you have n the account in 4 years? In 4 years' time, you will have s n the account (Round to the nearest cent) i
You deposit $5000 in a credit union at the end of each year for 10 years. The credit union pays 6% compound interest. Immediately after the tenth deposit, how much can you withdraw from your account
40 equal end-of-year deposits are made into a savings account that pays 1% interest. Compute the amount of each deposit that will permit withdrawals of $20,000 at the ends of the last 5 years, leaving the account empty.
Carla earns $100,000 per year now, and pays $20,000 per year on her fixed rate mortgage. Her income is subject to a COLA clause. If the risk-free rate of interest is 3%, and the expected inflation rate is 2% per year, what is the spending power of her net income in 10 years, expressed in today’s dollars? How would you find the present value of 10 years of Carla’s income without being given an inflation rate or interest rate? Fill...
Pays < > - Sa + | Assume the appropriate discount rate is 5% per period. The discount factor for a cash flow 4 periods from today is closest to: a) 0.7830 b) 0.8000 C10.8203 d) 0.8227 e) 0.8335 6. You Invest $100 in a stock today (T=0). At the end of year one, the stock is down 50%. What return would the stock have to have earn in the second year for you to break even (i.e. to have...