1-Suppose that the nominal rate is 12%, inflation rate is 3.5%, what is the real rate? 2-You...
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1-Suppose that the nominal rate is 12%, inflation rate is 3.5%, what is the real rate?
2-You must value a perpetual lease. It will cost $200,000 each year in real terms that is, its proceeds will not grow in real terms, but just contractually keep pace with inflation. The prevailing interest rate(nominal) is 10% per year, and the inflation rate is 3% per year forever. The first cash flow of your project next year is $200,000 quoted in today's real dollars. What is the PV of the project?
Related Book For
Intermediate Microeconomics and Its Application
ISBN: 978-0324599107
11th edition
Authors: walter nicholson, christopher snyder
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