# Question

You are planning to invest $2,500 today for three years at a nominal interest rate of 9 percent with annual compounding.

a. What would be the future value (FV) of your investment?

b. Now assume that inflation is expected to be 3 percent per year over the same three-year period. What would be the investment’s FV in terms of purchasing power?

c. What would be the investment’s FV in terms of purchasing power if inflation occurs at a 9 percent annual rate?

a. What would be the future value (FV) of your investment?

b. Now assume that inflation is expected to be 3 percent per year over the same three-year period. What would be the investment’s FV in terms of purchasing power?

c. What would be the investment’s FV in terms of purchasing power if inflation occurs at a 9 percent annual rate?

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