You will receive $100 from a savings bond in 4 years. The nominal interest rate is 8.50%. a. What is the present value of the proceeds from the bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. If the inflation rate over the next few years is expected to be 3.50%, what will the real value of the $100 payoff be in terms of today’s dollars? (Do not round intermediate calculations. Round your answer to 2 decimal places.) c. What is the real interest rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) d. Calculate the real payoff from the bond [from part (b)] discounted at the real interest rate [from part (c)]. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
You will receive $100 from a savings bond in 4 years. The nominal interest rate is 8.50%.
a. What is the present value of the proceeds from the bond? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
b. If the inflation rate over the next few years is expected to be 3.50%, what will the real value of the $100 payoff be in terms of today’s dollars? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
c. What is the real interest rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
d. Calculate the real payoff from the bond [from part (b)] discounted at the real interest rate [from part (c)]. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
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