An investment offers a total return of 18 percent over the coming year. Janice Yellen thinks the total real return on this investment will be only 13 percent.   What does Janice believe the inflation rate will be over the next year?

Q: You want to be able to consume 12.4% more of goods and services this coming year. You know that…

A: Rate of return = 12.4% or 0.124)Inflation rate = 8% or 0.08

Q: An investment has an expected return of 12 percent per year with a standard deviation of 6 percent.…

A: Mean return=12%Standard deviation=6%Calculate Z score and probability.

Q: An investor wants a real rate of return i′ of 6% per year. If the expected annual inflation rate for…

A: Interest rate: It can be defined as a rate at which the interest is being charged by the lender from…

Q: How much is the sum of the present value of the expected return over those periods

A: Cash Flows (Year 1-10) (CF) =  $15,000 per year Annual interest rate (r) = 5% Time Period (t) = 10…

Q: An investment will pay $50 at the end of each of the next 3 years, $250 at the end of Year 4, $350…

A: The objective of this question is to calculate the present value and future value of a series of…

Q: An investor has to decide how much he will be willing to pay for an investment that generates the…

A: The present value of future cash flows will be helpful in finding out the total investment which is…

Q: If an investment advisor promises to double your money in 6 years, she is promising an annual rate…

A: Using the following formula we can compute annual rate of return.Future Value (FV) = Present Value…

Q: a) You invest 155 000 TL for a year. At the end the year, you have 174 375 TL net in your account.…

A: We will apply the formula to calculate the real interest rate using the nominal interest rate and…

Q: Today (t=0), you invested the starting prinipal of 1536 dollars. At the end of the first, second and…

A: NPV is one of the capital budgeting method based on the time value of money and can be found as the…

Q: Beytwice is planning to invest $10,837 and wants a real interest rate of 6%, compounded annually.…

A: Interest refers to the amount charged by the lender on the lent amount. The borrower of the loan is…

Q: You estimate that by the time you retire in 35 years, you will have accumulated savings of $3.5…

A: b.) For real expenditure , firstly we will calculate real rate of interest using formula :   Real…

Q: You have an investment that is expected to make annual payments that grow at a constant annual rate…

A: In an annuity the payments grow by a constant amount and that factor remains fixed and the same for…

Q: 12. Nominal versus Real Returns Say you own an asset that had a total return last year of 12.1…

A: Nominal rate = 12.1% Inflation rate = 3.4%     Real rate of return = [(1 + Nominal rate)/(1 +…

Q: You decide to invest $14.4k today into a security that will make fixed annual payments to you of…

A: The money's present value is its current worth compared to some of its potential future value after…

Q: If you are promised a nominal return of 16%, on a one-year investment, and you expect the rate of…

A: Nominal Rate = 16% Inflation Rate = 2% Fishers Equation, (1+real rate)*(1+inflation rate) =…

Q: Suppose you wish to retire in 43 years on a fixed income equiva- lent to $66,000.00 in today's…

A: One of the important techniques that are used by the management in various areas such as a…

Q: 6,986 today and it will generate $9,412 in a year. You would have extra idle fund of $2,935 after…

A: Net present value is the difference between the present value of cash minus the initial investment…

Q: Consider two riskless perpetuities: (i) pays $120 every year; (ii) pays $10 every month. If the…

A: When the rate of return of the two risk less perpetuities is same, the factor that influences the…

Q: sent worth of income from an investment that follows an arithmetic gradient was projected to be P…

A: Gradient mean that there is constant growth of annuity by the fixed interval and in this we need to…

Q: You have two investment opportunities. The interest rate for both investments is 8%. Interest on the…

A: Lets understand the basics.Compounding is known as a number of times amount gets compounded once…

Q: An investment has a cost of $3500. The investment will have a payout at the end of the first year.…

A: Approach: Let's assume the desired minimum payout is P.We will roll out the yearly payout…

Q: A project will double your investment in one year with probability 0.58, otherwise you'll lose half…

A: Standard deviation of stock is computed as follows:-Standard deviation of stock = whereR= returnER=…

Q: An investment promises two payments of $700, on dates two and four months from today. If the…

A: The present value is the current value of future cash flows. Investors and money lenders use this…

Q: One investment plan that you can buy on 1st December 2020 promises to give you certain payment of…

A: The cash flow diagram is the representation of the company's cash flow graphically. The minus sign…

Q: is the rate of return on an investment of $9210 if the investor will recieve $2000 each year for the…

A: The given problem can be solved using RATE function in excel. RATE function computes interest rate…

Q: A project has a 0.68 chance of doubling your investment in a year and a 0.32 chance of halving your…

A: The standard deviation measures how spread the returns are. The probabilities of different returns…

Q: An investor has developed projections for an investment that will generate the following stream of…

A: The future value of cash flows will be reflective of the compounded value of investment in the…

Q: You will invest in something that will give you a payment of $211 two times each year.  You plan to…

A: Step 1 An annuity is a contract that you have with an insurance provider that calls for periodic…

Q: Suppose the face value of a bond which matures in seven years is $5,000, and pays a coupon of $75.…

A: The yield to maturity (YTM) formula can be used to determine a bond's rate of return. The entire…

Q: ou’re trying to choose between two different investments, both of which will cost $65,000 today.…

A: Future Value: The futue value of an investment is its value at the end of the investment period.…

Q: e expected average rate of return in the next decade is 4%. What is the value of $60,000 ten years…

A: The value of assets increase with time and grows to larger amount over the period of time due to the…

Q: You are considering a safe investment opportunity that requires a $1,450 investment today, and will…

A: IRR is the break even rate of return at which net present value is zero and cost of capital is the…

Q: You are researching interest rates and their forecasts. Your research provides you with the…

A: Profit is the amount earned in return of an investment.

Q: You are managing an investment portfolio and sell an “inflation-protected” annuity that pays $3,862…

A: The present value is the value of the sum received at time 0 or the current period. It is the value…

Q: You ́re considering an investment that you expect will produce an 9% return next year, and you…

A:

Q: You are managing an investment portfolio and sell an “inflation protected” annuity that pays $3,448…

A: The present value is the value of the sum received at time 0 or the current period. It is the value…

Q: You are considering investing in a security that will pay you $2,000 in 35 years.   a.  If the…

A: We have the cash flows associated with the security. We need to first determine the present value of…

Q: . Evaluate the following statement:Consider two riskless perpetuities: (i) pays $120 every year;…

A: The statement suggests that the only reason perpetuity (ii) would be a better investment than…

Q: You are comparing two annuities. Annuity A pays $115 at the end of each year for 5 years. Annuity B…

A: Time, value, and money refer to the money present today being more valuable than the money will…

Q: An investment has a cost of $3500. The investment will have a payout of X at the end of the first…

A: Time value of money’s concept suggests that money’s worth changes as time passes and this happens as…

Types of Insurance Contract

Insurance is a contract wherein an individual or entity gets financial protection from the insurance company for any damages or losses incurred. The individual or entity is called the insured, whereas the insurance company is called the insurer. The insured and the insurer enter a legal contract for a fixed term called the insurance term, and the contract is called an insurance policy.