Question: solve both question correctly Q 14: Khalid would like to receive a 45,000SR per year (in constant dollars) perpetually. How much must he deposit now
solve both question correctly
Q 14: Khalid would like to receive a 45,000SR per year (in constant dollars) perpetually. How much must he deposit now (year 0 ) into his savings account so that he receives this perpetual stream? The market interest rate expected from banks is 15%, while the inflation rate is expected to be 6% per year. Answer: Q 15: Consider a situation, where (I) the equal-payment cash flow of $1500 in constant dollars over three years is converted from the (II) equal-payment cash flow in actual dollars over three years, at an annual general inflation rate f=6%. Also, i=10%. What is the amount A in actual dollars equivalent A=$2000 in constant dollars
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