Exercise 19-7 Algo You would like to invest $30,000 for a year in a risk-free investment. A conventional certificate of deposit (CD) offers a 4.6% annual rate of return. You are also considering an "Inflation-Plus" CD which offers a real rate of return of 1.6 % regardless of the inflation rate. a. What is the implied (expected) inflation rate? (Round your answer to 2 decimal places.) Implied inflation rate % b. You decide to invest $15,000 in the conventional CD and $15,000 in the "Inflation-Plus" CD. What is your expected dollar value at the end of the year? Expected value
Exercise 19-7 Algo You would like to invest $30,000 for a year in a risk-free investment. A conventional certificate of deposit (CD) offers a 4.6% annual rate of return. You are also considering an "Inflation-Plus" CD which offers a real rate of return of 1.6 % regardless of the inflation rate. a. What is the implied (expected) inflation rate? (Round your answer to 2 decimal places.) Implied inflation rate % b. You decide to invest $15,000 in the conventional CD and $15,000 in the "Inflation-Plus" CD. What is your expected dollar value at the end of the year? Expected value
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Exercise 19-7 Algo
You would like to invest $30,000 for a year in a risk-free investment. A conventional certificate of deposit (CD) offers a 4.6% annual
rate of return. You are also considering an "Inflation-Plus" CD which offers a real rate of return of 1.6% regardless of the inflation rate.
a. What is the implied (expected) inflation rate? (Round your answer to 2 decimal places.)
Implied inflation rate
%
b. You decide to invest $15,000 in the conventional CD and $15,000 in the "Inflation-Plus" CD. What is your expected dollar value at
the end of the year?
Expected value
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