The implied real interest rate of 3-month Treasury bills (U.S. government debt of 3-month maturity) is currently inflation is because the nominal interest rate paid on these Treasury bills is and positive / zero / negative zero / negative / positive zero / zero / zero negative / about zero / positive
Q: Suppose your annual nominal income for the next four years is $78,500, and the annual inflation rate…
A: Nominal income: When the income of a consumer is calculated on the basis of the current year's…
Q: Interest, inflation , and purchasing power Suppose Caroline is a sports fan and buys only baseball…
A: Purchasing power refers to the ability of the consumer to buy goods and services. If the income of…
Q: The nominal interest rate currently paid by local commercial banks is 8.5%. If the inflation rate is…
A: Real Interest rate refers to the interest rate that has been adjusted for inflation, reflecting the…
Q: uppose the annual interest rate is R = 0.10 (10%). If the expected inflation rate is πe= 0.04 (4%)…
A: annual interest rate is R = 0.10 (10%) expected inflation rate is πe= 0.04 (4%)
Q: A series of four annual constant-dollar payments beginning with $50,000 at the end of the first year…
A: Given Information: The amount at the beggining= $50,000 Rate of interest at the end of 1st year =…
Q: Creditors and debtors tend to lose during an inflationary period since: (1) The nominal interest…
A: Since you have asked multiple question, we will solve the first question for you. If you want any…
Q: The total price of purchasing a basket of goods in the United Kingdom over four years is: year 1 =…
A: Given Information- The total price of buying a basket of goods in the given economy over four years…
Q: Knowing that the average annual accumulated inflation in 2018 was 3.75%, calculate how much the…
A: Inflation is an economic concept that is defined as a rise in the general price level of goods and…
Q: A friend is celebrating her birthday and wants to start saving for her anticipated retirement. She…
A: Given , Years until retirement: 30 Amount to withdraw each year: $120,000 Years…
Q: You are given a loan with a nominal interest rate of 5%. You must pay back this loan one year from…
A: The nominal interest rate the interest rate that you earn or pay on money that you lend or borrow;…
Q: Q3.The amount of sugar produced in a sugar factory decreases by eight percent annually during the…
A: In this question we have to find out current value of factory of water consumption with the help of…
Q: If the real discount rate is 7% and the inflation rate is 10%, which of the following interest rates…
A: Given information: Real discount rate = 7% Inflation rate is = 10%
Q: man desires to have P3M money in his savings when he retires after 25 years. This has amount in the…
A: Future worth is the value of a assets at a particular date. It estimates the ostensible future…
Q: Inflation in Macroland is 5% this year and it is expected to remain at this rate for a foreseeable…
A:
Q: With no inflation, a bank would be willing to lend a business firm $5 million at an annual interest…
A: The bank is more concerned about a real interest rate. The real interest rate = Nominal interest…
Q: For a given real interest rate, a decrease in the inflation rate would decrease the after-tax real…
A: The relationship between real interest rate, inflation rate, and the nominal interest rate has been…
Q: Suppose Home Depot issues 30-year bonds on which it pays a 5.0% (nominal) interest rate. Further,…
A: As we know Real rate = Nominal interest rate - Actual interest rate we can calculate the following…
Q: Suppose the price level reflects the number of dollars needed to buy a basket of goods containing…
A: Inflation: Inflation is an economic concept that is defined as a rise in the general price level of…
Q: As of July 2012, the 12 month CPI inflation rate was 1.4 percent and the 12 month core CPI inflation…
A: A). Core CPI inflation takes the price trend prevailing in energy sector & food sector where as…
Q: Suppose the annual nominal interest rate on bank certificate of deposit is 12%. How much is the real…
A: The expression that shows the relationship between the nominal interest rate, real interest rate,…
Q: Last year you bought a house for $200,.000, and you sell the house this year for $230.000,…
A: Answer; 1) inflation = (115.5/110) - 1 = 0.05 or 5% Capital gain = 230000-200000 = 30000 Tax on gain…
Q: Assume a constant inflation rate of 5% annually and 0% interest rate. Over a whole period of 14…
A: Keeping in mind the law of one price, the equivalent selling price of an investment will be equal to…
Q: nominal interest rate is 4% .Suppose that the actual inflation rate turns out to be 4% as well. What…
A: The Fisher effect depicts the relationship between real and nominal rate of interest…
Q: Let's say we expect the inflation rate to be 7 percent in a year, 5 percent in two years and 3…
A: We are going to use fisher identity to answer this question.
Q: A series of five constant dollar (or real dollar) payments beginning with $8000 at the end of the…
A: Real interest rate is calculated using the formula [(1+ i) / (1+ inflation) ] -1 = [(1+12%)/(1+5%)…
Q: You observe that the inflation rate in the United States is 3.6 percent per year and that T- bills…
A: Inflation occurs when the price level of all goods and services in the economy experiences a…
Q: if you expect the inflation rate to be 15 percent next year and a one-year bond has a yied to…
A: Inflation rate = 15 Yield to maturity = 7 %
Q: The purchase of a car requires a $25 000 loan to be repaid in monthly instalments for four years at…
A: Inflation rate: It means the percentage increase or decrease in prices during a specified period,…
Q: Your pension is $8,000 per month when you the next year, inflation is 1%. If your pension is indexed…
A: Inflation decreases our purchasing power so Pension income is increased to compensate for that. You…
Q: Interest rates can be expressed in real or nominal terms. Which of the following is most correct?…
A: Inflation refers to a rise in the general prices of goods and services.
Q: the real interest rate is 2% and expected inflation is 3%, the nominal interest rate is O-1%. 1%..…
A: Given information, Real interest rate: 2% Expected inflation rate: 3% To find: Nominal interest…
Q: Suppose that a deceased relative had put $1,000 in an envelope in 1954 and you just discovered this…
A: here we can calculate the following terms as follow
Q: he inflation over four consecutive quarter is fl=1%,f2=0.5%, fs-0.5%, f-196. what is the inflation…
A: Here, we calculate the given as follow;
Q: The average inflation rate is calculated on the basis of the CPI for all the items in the market…
A: True. The average inflation rate is calculated on the basis of the CPI for all the items in the…
Q: Suppose you obtain a 30-year mortgage loan on which you have to pay a 7.0% (fixed) interest rate.…
A: Real interest rate: It is the interest rate that is measured after adjusting for either the expected…
Q: Let’s assume that the real rate of return is a constant 20%. If inflation is 50%, then the nominal…
A: There is a relationship between the real rate of return and the nominal real rate of return. The…
Q: Cost of a medical treatment after one year is $100,000. The real discount rate is 5%. The economy…
A: Nominal Discount rate-Real Discount rate + Inflation=5+6=11% Which gives Present value of
Q: Suppose you lent money to a friend a few years ago at a nominal interest rate of 6%. At the time…
A: In any economy, the prices often fluctuate due to which there are many consequences in the economy.…
Q: "An annuity provides for 15 consecutive end-of-year payments of $73,000 in actual dollars. The…
A: Since the annuity is provided for 15 years and end of payments is $73000 in actual dollars, with…
Q: Assume that you borrow $5,000, and you pay back the $5,000 plus $250 in interest at the end of the…
A: The real interest rate is adjusted to remove the effects of inflation. A nominal interest rate…
Q: The value of a price index in the base year is 0 100 200 The inflation rate The average cost of…
A: the price index refers to a normalized average of price relatives for a given class of products or…
Q: For a given real interest rate, a decrease in the inflation rate would a. increase the…
A: We know,Real interest rate = Nominal interest rate – inflation rateTherefore, a decrease in…
Q: You may pay $15,000 for an annuity that pays $2500 per year for the next 10 years. You want a real…
A: Amount paid for annuity = $15000 Annual revenue = $2500 Time = 10 years Interest rate = 5%…
Q: Assume the nominal rate of return is 8.63% and the real rate is 4.68%. Find the inflation rate of…
A: The real rate of return formula is the sum of one plus the nominal rate divided by the sum of one…
Q: In wisely planning for your retirement, you invest $22,000 per year for 20 years into a 401K…
A: First we will find Nominal interest rate :- Nominal interest rate = [ ( 1+ real interest rate) ( 1 +…
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- You earn a nominal return of 6% on your savings and the tax rate is 20%. If the rate of inflation is 2%, what are the before-tax real interest rate and your after-tax rate of return? please write down the solution precisely ( especially after-tax rate of return)If the real discount rate is 7% and the inflation rate is 10%, Which of the follo ing interest rates ill be sed to find the present orth of a which of the following interest rates will be used to find the present worth of a series of cash flows that are in constant-worth dollars? a. 10.0% b. 17.7% c. 7.0% d. 10.7%.a) Assume that the nominal return on U.S. government T-bills was 10% during 2002, when the rate of inflation was 6%. The real risk-free rate of return on theseT-bills was: b) When individuals believe they have sufficient income and assets to cover their expenses while maintaining a reserve for uncertainties, they are most likely in the phase of the investment life cycle. gifting B. consolidation C. accumulation D. spending c) Find the duration of a 3-year bond with annual coupon payments of $80 and a par value of $1,000. The current market price of the bond is $950.25. If the YTM of the bond dropped by 1%, what would happen to the bond price?
- If the real growth of money interest rate for the past year has been 4% and the general inflation has been 2.5%, the combined (market) interest rate is closest to what value? (a) 1.5% (b) 6.5% (c) 6.6% (d) 10.0%?The purchasing power (real value of money) decreases if inflation is present in the economy. For example, the purchasing power of $33,000 after t years of 8% inflation is given by the model P=33,000e−0.08t dollars. How long will it take for the value of a $33,000 pension to have a purchasing power of $16,500 under 8% inflation?A friend is celebrating her birthday and wants to start saving for her anticipated retirement. She has the following years to retirement and retirement spending goals. Years until retirement: 30 Amount to withdraw each year: $120,000 Years to withdraw in retirement: 25 Interest rate: 7.5% Because your friend is planning ahead, the first withdrawal will not take place until one year after she retires. She wants to make equal annual deposits into her account for her retirement fund. Assume that the inflation rate is 3%. Consequently, when your friend retires she will want to withdraw $120,000 each year in today’s dollars. What amount is she planning to receive in year 31 (the end of her first year of retirement)?
- Interest RatesSuppose that you make a loan of $1,500 to your friend at a rate of 10% interest because you expect the inflation rate to be 5%.a) By how much does your purchasing power increase once the loan is completely paid off?b) Assuming that after the loan was repaid, you discovered that inflation rate over the life of the loan was only 2%. Who gained?Suppose that you just purchased a used car worth $14.000 in today's dollars. Assume also that. to finance the purchase. you borrowed $12,000 from a local bank at 8% compounded monthly over two years. ·n1e bank calculated your monthly payment at $542.36. Assume that average general inflation will run at I% per month over the next two years.(a) Determine the annual inflation-free interest rate (i') for the bank.(b) What equal monthly payments, in terms of constant dollars over the next two years, arc equivalent to the series of actual payments to be made over the life of the loan?The real risk-free rate is 4%. Inflation is expected to be 3% this year, 4% next year, and then 3% thereafter. The maturity risk premium is estimated to be 0.0003 x (t - 1), where t = number of years to maturity. What is the nominal interest rate on a 7-year Treasury security? Do not round intermediate calculations. Round your answer to two decimal places.
- Your rich aunt is going to give you an end-of-year gift of $1,000 for each of the next 10 years. Solve, a. If general price inflation is expected to average 6% per year during the next 10 years, what is the equivalent value of these gifts at the present time? The real interest rate is 4% per year. b. Suppose that your aunt specified that the annual gifts of $1,000 are to be increased by 6% each year to keep pace with inflation. With a real interest rate of 4% per year, what is the current PW of the gifts?Consider the Brazilian experience with crawling peg ER regime between 1995 and 1999. In this regime, the Brazilian real was being devalued continuously at a 7.5 % rate annually. a)How would the Brazilian nominal interest rate be related to the US nominal interest rate in this regime? (Assume that the US annual interest rate was constant at 8 % during this time period.)3. An investor wants to be able to buy 4% more goods and services in the future in order to induce her to invest today. During the investment period prices are expected to rise by 2%. Which statement(s) below is/are true? 1. 4% is the desired real rate of interestII. 6% is the approximate nominal rate of interest requiredIII. 2% is the expected inflation rate over the periodA. I onlyB. II onlyC. III onlyD. I and II onlyE. I, II, and III are true