When solving for future value, if a problem presents you with and inflation rate and the...
When solving for future value, if a problem presents you with and inflation rate and the expected rate of return, is it correct to combine the rates such as (inflation 2%, expected return 6%) when solving for FV in excel, using 8% for the rate? I am unclear how inflation affects the rate of return.
Homework Answers
Interest rates (rate of return) comprise of two components viz. (1) Real interest rate and (2) Inflation rate. If both are combined together, the rate is referred to as 'Nominal interest rate'. Nature of the rate specified should be ascertained from the context.
When solving for future value, we have to ascertain whether the rate of return specified is the nominal rate or the real rate. If it is nominal rate, inflation rate shall not be added to it. If the rate given is real interest rate, inflation rate should be added to it and the combined rate should be used for calculating future value.
In the given example, if the expected return of 8% is the nominal rate, it contains the inflation factor which shall not be added again. If the rate of return of 8% is real interest rate, inflation rate of 2% should be added and the rate to be used shall be 10%.
Add Answer to:
When solving for future value, if a problem presents you with
and inflation rate and the...
When solving for a present value, the interest rate is commonly referred to as the compound...
When solving for a present value, the interest rate is commonly referred to as the compound rate, but when solving for the future value, the interest rate is called the discount rate. True False Question 6 (2 points) Which of the following is the correct formula for calculating the future value? 1) FV - PV (1 ) O2) PV = FV * (1 + r)" (3) PvPV O4) FV - PV x (1 + r)"
Which of the following is among the issues caused by the uncertainty of future inflation rates?...
Which of the following is among the issues caused by the uncertainty of future inflation rates? Select the correct answer below: a. investing in real estate ensures that inflation will not affect the value of the investment b. people saving for retirement may not know how much to save today to ensure a desired future standard of living c. borrowing at fixed interest rates is beneficial when high future inflation is expected d. high inflation increases the value of real...
I am working on a problem set that involves calculating the future value of a series...
I am working on a problem set that involves calculating the future value of a series of payments over 18 years. The first year, there is one lump payment and the remaining years there is a lesser payment but remains the same amount paid annually. When I use the FV function in excel and apply the first lump as PV, and the following identical payments as PMT, I get the answer, however, to cross check my work, I run the...
Please include all the details and how to solve 1 Solving for i in an Annuity...
Please include all the details and how to solve
1 Solving for i in an Annuity 2 Present Value -10,500 3 Future Value 4 Annual Payment 1,500 5 Number of Years 5 Annual Rate 10 B Instruction: Suppose that you are approached with an offer to purchase an investment o that will provide cash flows of $1,500 per year for 10 years. The cost of 1 purchasing this investment is $10,500. 2 So now the annual rate is just the...
answer the problem solving under investment management? Problem 9 Find the future value of a 4-year...
answer the problem solving under investment management? Problem 9 Find the future value of a 4-year annuity due of $400 at 6%. The answer is: Problem 10 Calculate simple interest and compound interest assuming that principal amount is. 10,000; interest rate is 9% for three years. What is the amount different between compound and simple interest? The answer is: Problem 11 You are scheduled to receive 13,000 in two years. When you receive it, you will invest it for six...
Time Value of Money In solving these problems please use Excel formulas of the time value of money valuation including : Present Value / PV, Future Value / FV, interest Rate / Rate, Number of periods...
Time Value of Money In solving these problems please use Excel formulas of the time value of money valuation including : Present Value / PV, Future Value / FV, interest Rate / Rate, Number of periods / NPER First National Bank TIME VALUE OF MONEY ANALYSIS You have applied for a job with a local bank. As part of its evaluation process, you must take an examination on time value of money analysis covering the following questions: 1. Draw time...
6. 7. Inflation targeting and the Taylor rule in the IS-LM model Consider a closed economy...
6.
7.
Inflation targeting and the Taylor rule in the IS-LM model Consider a closed economy in which the central bank follows an interest rate rule. The IS relation is given by Y C(Y- T) I(Y,r) G Where r is the real interest rate. The central bank sets the nominal interest rate according to the rule i = i* + a(n° =- T*) + b(Y- Y1) Where T is expected inflation, T* is the target rate of inflation, and Yn...
6. 7. Inflation targeting and the Taylor rule in the IS-LM model Consider a closed economy...
6.
7.
Inflation targeting and the Taylor rule in the IS-LM model Consider a closed economy in which the central bank follows an interest rate rule. The IS relation is given by Y C(Y- T) I(Y,r) G Where r is the real interest rate. The central bank sets the nominal interest rate according to the rule i = i* + a(n° =- T*) + b(Y- Y1) Where T is expected inflation, T* is the target rate of inflation, and Yn...
please answer Question 7: Inflation targeting and the Taylor rule in the IS-LM model Consider a...
please answer Question 7:
Inflation targeting and the Taylor rule in the IS-LM model Consider a closed economy in which the central bank follows an interest rate rule. The IS relation is given by Y C(Y- T) I(Y,r) G Where r is the real interest rate. The central bank sets the nominal interest rate according to the rule i = i* + a(n° =- T*) + b(Y- Y1) Where T is expected inflation, T* is the target rate of inflation,...
Solve the following Time Value of Money Problem in excel. If you deposit $16,000 today at...
Solve the following Time Value of Money Problem in excel. If you deposit $16,000 today at 5.9%, how much will you have in 10 years? In your written response show the factors you use to solve the equation by showing NPER = ?, Rate = ?, PMT = ?, PV = ?, FV = ?, TYPE = 0. Indicate what you are solving for and give the correct answer.
When solving for a present value, the interest rate is commonly referred to as the compound rate, but when solving for the future value, the interest rate is called the discount rate. True False Question 6 (2 points) Which of the following is the correct formula for calculating the future value? 1) FV - PV (1 ) O2) PV = FV * (1 + r)" (3) PvPV O4) FV - PV x (1 + r)"
Please include all the details and how to solve
1 Solving for i in an Annuity 2 Present Value -10,500 3 Future Value 4 Annual Payment 1,500 5 Number of Years 5 Annual Rate 10 B Instruction: Suppose that you are approached with an offer to purchase an investment o that will provide cash flows of $1,500 per year for 10 years. The cost of 1 purchasing this investment is $10,500. 2 So now the annual rate is just the...
6.
7.
Inflation targeting and the Taylor rule in the IS-LM model Consider a closed economy in which the central bank follows an interest rate rule. The IS relation is given by Y C(Y- T) I(Y,r) G Where r is the real interest rate. The central bank sets the nominal interest rate according to the rule i = i* + a(n° =- T*) + b(Y- Y1) Where T is expected inflation, T* is the target rate of inflation, and Yn...
6.
7.
Inflation targeting and the Taylor rule in the IS-LM model Consider a closed economy in which the central bank follows an interest rate rule. The IS relation is given by Y C(Y- T) I(Y,r) G Where r is the real interest rate. The central bank sets the nominal interest rate according to the rule i = i* + a(n° =- T*) + b(Y- Y1) Where T is expected inflation, T* is the target rate of inflation, and Yn...
please answer Question 7:
Inflation targeting and the Taylor rule in the IS-LM model Consider a closed economy in which the central bank follows an interest rate rule. The IS relation is given by Y C(Y- T) I(Y,r) G Where r is the real interest rate. The central bank sets the nominal interest rate according to the rule i = i* + a(n° =- T*) + b(Y- Y1) Where T is expected inflation, T* is the target rate of inflation,...
Most questions answered within 3 hours.
-
Where is the error in this code sequence?
String s1 = "Hello";
String s2 = "ello";...
asked 10 months ago -
Financial data for Joel de Paris, Inc., for last year
follow:
Joel de Paris, Inc.
Balance...
asked 10 months ago -
Consider this reaction:
Al2(SO4)3 (aq)+ BaCl3
(aq) Al2Cl6 (aq)- +
3BaSO4(s) . What is the...
asked 10 months ago -
Suppose that Savneet is considering increasing her
recent random sample from 20 car rentals to 40...
asked 10 months ago -
Trucks arrive at an unloading terminal at an average rate of 120
per hour.
Trucks arrive...
asked 10 months ago -
Why are methanol and ethanol completely soluble in water while
octanol is not very little soluble....
asked 10 months ago -
A facilities manager at a university reads in a research report
that the mean amount of...
asked 10 months ago -
When the CuSO4 is rehydrated by adding water to the anhydrous
compound, is this an endothermic...
asked 10 months ago -
A ray of sunlight is passing from diamond into crown glass; the
angle of incidence is...
asked 10 months ago -
A block of mass 0.249 kg is placed on top of a light, vertical
spring of...
asked 10 months ago -
how do the kidneys compensate in the presences of acidosis
a) trigger hyperventilate
b) reserve acid...
asked 10 months ago -
Question 501 pts
The rental rate of capital to the firm increases. Which of the
following...
asked 10 months ago