If the rate of inflation is 2.8% per year, the future price p () (in dollars) of a certain item can be modeled by the following exponential function, where t is the number of years from today. p(t) = 600(1.028) Find the current price of the item and the price 9 years from today. Round your answers to the nearest dollar as necessary. Current price: Price 9 years from today: S

If the rate of inflation is 2.8% per year, the future price p () (in dollars) of a certain item can be modeled by the following exponential function, where t is the number of years from today. p(t) = 600(1.028) Find the current price of the item and the price 9 years from today. Round your answers to the nearest dollar as necessary. Current price: Price 9 years from today: S

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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According to the concepts underlying the present-value formula, would you prefer to receive (a) P75 one year from now, (b) P85 two years from now, or (c) P90 three years from now, if the relevant market interest rate is 10% and will remain at 10% for the next three years? a. The present values of all three choices are identical b. P75 one year from now c. P85 two years from now d. P90 three years from now
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Suppose that the current one-year rate (one- year spot rate) and expected one-year T-bill rates over the following three years (i.e., years 2, 3, and 4, respectively) are as follows: 1R1=6%, E(2r1) =7%, E(3r1) =7.5% E(4r1)=7.85% 1 Using the unbiased expectations theory, calculate the current (long-term) rates for one-, two-, three-, and four-year-maturity Treasury securities. Show your answers in percentage form to 3 decimal places.
You note the following yield curve in The Wall Street Journal. According to the unbiased expectations theory, what is the 1-year forward rate for the period beginning one year from today, 2f1? Note: Do not round intermediate calculations. Round your percentage answer to 2 decimal places (i.e., 0.1234 should be entered as 12.34). Maturity One day One year Two years Three years. Forward rate Yield 2.80% 6.30 7.30 9.80
At present, you invest 10,000 pesos in a 15% security for 5 years. During the time, the average annual inflation is 6%. How much, in terms of present pesos, will be the account of maturity? Using this formula F=P(1+f)^n.
At a rate of inflation of 2.3% per quarter, approximately how many months will it take for goods to become 50% more expensive that they are today? Round your final answer to one decimal. 17.8 months 53.1 months 45.3 months 15.2 months None of these options
Finding Forward Rates Suppose the following yield curve: 1-period rate = 4.75%, 2-period rate=4.85%, 3-period rate= 4.90%, 4 period rate=5.01%. What is the 2 year forward rate in 2 years? What is 1 year rate in 2 years?
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Suppose today that you have the following information: yield on 10-year TIPS: 3.5% yield on 10-year Treasury note: 3.0% What is the expected annual rate of inflation (approximate) over the next 10 years?
If the average, long term inflation rate is 3%, how many years does it take for prices to double? 24 years 36 years 12 years 6 years
General price inflation is estimated to be 3% for the next 5 years, 5 % the 5 years after that, and 8% the following 5 years. If you invest $10,000 at 10% for those 15 years, what is the future worth of your investment in Year-0-dollars at that time? No excel Please and thank you

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