assume the inflation rate 6% per year and the real interest rate is 5%. A)the number...
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 ?
Homework Answers
A) FV = PV * (1+inflation rate)^number of years
FV = 30,000 * (1+0.06)^5
FV = 30,000 * 1.06^5
FV= 40,146.77
B)
FV = PV * (1+ Real interest rate)^number of years
FV = 30,000 * (1+0.05)^5
FV = 30,000 * 1.05^5
FV= 38,288.45
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