Leonardo wants to deposit money each year for the next five years and each deposit to have $40,000 in real dollars currently and the inflation rate is 3% per year and the nominal interest rate is 9.18%.

(a) What is the value 5 years later in nominal dollars and current dollars (Show Calculations)? (10 points)

(b) What are the values today respectively for the nominal cash flows and real cash flows? (Show Calculations) (10 points)

Answer rating: 100% (QA)

To calculate the future and present values of deposits in both nominal and real dollars we can use t... View the full answer