2. If the current inflation rate is 3.6% and you have an investment opportunity that pays 10.9%, then what is the real rate of interest on your investment? Please use both exact formula and approximate formula.

2. If the current inflation rate is 3.6% and you have an investment opportunity that pays 10.9%, then what is the real rate of interest on your investment? Please use both exact formula and approximate formula.

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter2: Using Financial Statements And Budgets

Section: Chapter Questions

Problem 7LO

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Concept explainers

Effective Interest Rate

The term interest rate can be defined as the amount that is charged by the lender as a percentage on the principal amount. Interest rate which is charged annually is known as annual percentage rate.

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2. If the current inflation rate is 3.6% and you have an investment opportunity that pays 10.9%, then what
is the real rate of interest on your investment? Please use both exact formula and approximate formula.

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