Question 1

You would like to have the current equivalent of $400,000 in 3 years. Your investments earn 6.00% APR compounded annually. You expect that inflation over the 3 years will average 4.00% per year. How much would you have to invest today in nominal terms to be able to have just enough in 3 years to have $400,000 in real terms?

$389,116

$396,672

$377,783

$366,450

$370,227

Question 2

You would like to have the current equivalent of $400,000 in 3 years. Your investments earn 6.00% APR compounded annually. You expect that inflation over the 3 years will average 4.00% per year. How much would you have to invest per year, for three years, starting in 1 year (the same amount in each year) in nominal terms to be able to have just enough in 3 years to have $400,000 in real terms?

$145,572

$138,506

$148,399

$137,092

$141,332