Question
In: Finance
Assume the real rate of interest is 4.00% and the inflation rate is 6.00%. What is...
Assume the real rate of interest is 4.00% and the inflation rate is 6.00%. What is the value today of receiving 11,413.00 in 9.00 years? round answer to 2 decimal places
Solutions
Expert Solution
We will first calculate the nominal rate of interest to use it as discounting rate.
Nominal rate of interest=( (1+real interest rate) (1+inflation))-1
= ((1.04)(1.06))-1
= .1024 or 10.24%
We will now discount the future sum at the present value= 11413/(1.1024)^9= $ 4746.21
Present value will be= $4746.21
jeff jeffy answered 2 years agoRelated Solutions
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Page | 2
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