Assume that the economy has an annual inflation rate of 5 percent. Are the following investments profitable in real terms? You do not need to explain your answer. (a) A$1,000 face-value bond, which you purchase at a 30% discount, that pays a monthly coupon of$4. (b) A$1 million house the increases in price by$45,000 per year. You do not rent out the house, nor do you undertake renovations. (c) A$1 million house that you renovate for$45,000 over the course of a year, causing the price to increase to$1.1 million.
Assume that the economy has an annual inflation rate of 5 percent. Are the following investments profitable in real terms? You do not need to explain your answer. (a) A$1,000 face-value bond, which you purchase at a 30% discount, that pays a monthly coupon of$4. (b) A$1 million house the increases in price by$45,000 per year. You do not rent out the house, nor do you undertake renovations. (c) A$1 million house that you renovate for$45,000 over the course of a year, causing the price to increase to$1.1 million.
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter2: The One Lesson Of Business
Section: Chapter Questions
Problem 2.6IP
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Assume that the economy has an annual inflation rate of 5 percent. Are the following investments profitable in real terms? You do not need to explain your answer.
(a) A$1,000 face-value bond, which you purchase at a 30% discount, that pays a monthly coupon of$4.
(b) A$1 million house the increases in price by$45,000 per year. You do not rent out the house, nor do you undertake renovations.
(c) A$1 million house that you renovate for$45,000 over the course of a year, causing the price to increase to$1.1 million.
(e) You purchase a Non-Fungible Token (NFT) for$98 million. The following year, you are able to sell it for$102.5 million
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