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?

Answer rating: 100% (QA)

1 Real Rate Calculation The nominal interest rate is 12and the inflation rate is 35To ... View the full answer