Task (following on from the previous part): Suppose that the infrastructure fund now wants to adjust the above cash flows to account for a constant rate of inflation e of 1% per annum. The fund can borrow at an interest rate of 1.5% per annum. Calculate the net present value at this interest rate, allowing for inflation. Is the yield is allowing for inflation larger or smaller than 1.5%? Answer: The formula for the net present value with inflation is, with 1 - 1.5% and measured in millions of . Select) at rate i Hence the NPV) = Select) The yield will be Select) than 1.5%, as the sign changes once from Select 1 Task (following on from the previous part): Suppose that the infrastructure fund now wants to adjust the above cash flows to account for a constant rate of inflation e of 1% per annum. The fund can borrow at an interest rate of 1.5% per annum. Calculate the net present value at this interest rate, allowing for inflation. Is the yield is allowing for inflation larger or smaller than 1.5%? Answer: The formula for the net present value with inflation is, with 1 - 1.5% and measured in millions of . Select) at rate i Hence the NPV) = Select) The yield will be Select) than 1.5%, as the sign changes once from Select 1