At beginning of year, CPI is at 100. Inflation swap buyer pays 3% for a 5 year swap with a notional amount of $1,000,000. At the end of 5 years, the CPI is 119.80. The buyer will receive a net payment of: (To get "net" payment, subtract amount seller received from the amount seller paid under the swap agreement. Round answer to nearest dollar.)

At beginning of year, CPI is at 100. Inflation swap buyer pays 3% for a 5 year swap with a notional amount of $1,000,000. At the end of 5 years, the CPI is 119.80. The buyer will receive a net payment of: (To get "net" payment, subtract amount seller received from the amount seller paid under the swap agreement. Round answer to nearest dollar.)

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter22: Inflation

Section: Chapter Questions

Problem 37P: Rosalie the Retiree knows that when she retires in 16 years, her company will give her a one-time...

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Rosalie the Retiree knows that when she retires in 16 years, her company will give her a one-time payment of 20,000. However, if the inflation rate is 6 per year, how much buying power will that 20,000 have when measured in todays dollars? Hint: Start by calculating the rise in the price level over the 16 years.
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