Consider a situation, where (a) the equalpayment cash flow of $1,000 in constant dollars over three years
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Consider a situation, where (a) the equal‐payment cash flow of $1,000 in constant dollars over three years is converted from (b) the equal‐payment cash flow in actual dollars over three years at an annual general inflation rate of f̅ = 3.8%. Also, i = 9%. What is the amount A in actual dollars equivalent to A′ = $1,000 in constant dollars?
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Given i 9 f 38 we find the inflationfree interest rate as f...View the full answer
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