4 You are planning to invest $2,500 today for three years at a nominal interest rate...

4 You are planning to invest $2,500 today for three years at a nominal interest rate of 9 percent with annual compounding. What would be the future value of your investment? Now assume that inflation is expected to be 3 percent per year over the same three-year period. What would be the investment's future value in terms of purchasing power? What would be the investment's future value in terms of purchasing power if inflation occurs at a 9 percent annual rate?

Expert Solution

1)

2)

3)

jeff jeffy answered 2 years ago

4.a. Suppose that the nominal interest rate is 6%. If the nominal rate is three times...

4.a. Suppose that the nominal interest rate is 6%. If the nominal rate is three times of the real interest rate. Find the inflation rate? b.If both riskiness of bonds and government budget deficit increase, what would happen to bonds prices? Show these changes in a graph?

You invest $12,000 now and get $14,000 back in 7 years. (A) What nominal interest rate...

You invest $12,000 now and get $14,000 back in 7 years. (A) What nominal interest rate convertible every four months did you earn? (B) What nominal discount rate compounded semi-annually did you earn? (C) What annual effective rate of discount did you earn?

Assume you invest $13,880 today for 9 years at a 4.1% continuously compounded rate of interest....

Assume you invest $13,880 today for 9 years at a 4.1% continuously compounded rate of interest. How much money would you have at the end of the 9 years after the effects of compounding?

a) You invest $117 today and expect to receive $183 in 13 years. What interest rate...

a) You invest $117 today and expect to receive $183 in 13 years. What interest rate are you expecting to earn? (Put rate in 4 decimal places.) b) You invest $291 at the end of each year for 25 years in an account earning 6.9%. How much do you expect to be able to withdraw in 25 years? (Note this is an ordinary annuity.)

You just deposited $2,500 in a bank account that pays a 4.0% nominal interest rate, compounded...

You just deposited $2,500 in a bank account that pays a 4.0% nominal interest rate, compounded quarterly. If you also add another $5,000 to the account one year (4 quarters) from now and another $7,500 to the account two years (8 quarters) from now, how much will be in the account three years (12 quarters) from now? Group of answer choices $18,563.53 $17,679.55 $16,035.88 $16,837.67 $15,234.08

If you invest $81,000 today at 10% interest for 19 years, you will have $_________ in...

If you invest $81,000 today at 10% interest for 19 years, you will have $_________ in 19 years. (Do not include the dollar signs ($). Round your answers to 2 decimal places. (e.g., 32.16))

You will receive $100 from a zero-coupon savings bond in 4 years. The nominal interest rate...

You will receive $100 from a zero-coupon savings bond in 4 years. The nominal interest rate is 8.80%. a. What is the present value of the proceeds from the bond? b. If the inflation rate over the next few years is expected to be 3.80%, what will the real value of the $100 payoff be in terms of today’s dollars? c. What is the real interest rate?

What is the distinction between the nominal interest rate and the real interest rate? 4. In a...

What is the distinction between the nominal interest rate and the real interest rate? 4. In a diagram, show the effect on the real interest rate and amount of investment if people’s disposable income increases. 5. Explain how a government budget deficit affects the market for loanable funds. What is the effect on investment? Ignore the possibility of a Ricardo-Barro effect. 6. Before there is any international trade or international lending and borrowing, suppose the world real interest rate is less than the...

TTC is planning to raise $3.25 million for three years at an interest rate of 7.35...

TTC is planning to raise $3.25 million for three years at an interest rate of 7.35 percent to finance their expansion. The Alban County Board of Commissioners has just offered the firm the $3.25 million they need at 5.25 percent if the firm builds in Alban County, pays the interest annually, and repays the principal at the end of three years. What is the net present value of the loan to TTC if the firm's tax rate is 21 percent...

If you invest $1,000 today at an interest rate of 10% per year, how much will...

If you invest $1,000 today at an interest rate of 10% per year, how much will you have 20 years from now, assuming no withdrawals in the interim? What is the present value of the following cash flows at an interest rate of 10% per year? $100 received five years from now. $100 received 60 years from now. $100 received each year beginning one year from now and ending 10 years from now. $100 received each year for 10 years...

Question