Let us assume you have $1000 to spend on buying books. Each book costs on average $50 and are expected to increase in price by 4%. If you invest your money now, you will be able to buy 21 books in years time for what 20 books cost today. What interest rate you need to find in nominal terms to overcome effects of inflation and still realize reward for waiting?

Q: Inflation is a hectic problem of our economy especially in today’s life. How this problem influences…

A: Inflation is a hectic problem of our economy, especially in today’s life. How this problem…

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A: Below is the following information given in the question: *Real Interest Rate = 8% *Inflation = 4%

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A: First, we need to understand the difference between the nominal interest rate and the real interest…

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A: According to the Fisher equation,Real interest rate = Nominal interest rate - Inflation rate

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A: Given, PV = $45000  FV = $175,000  n =12Inflation rate=3%

Q: please do fast with proper calculation

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A: The money which has to be paid for obtaining a service or a good is the price.

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A: # Before moving on to calculations, we must first understand what actually is the relationship…

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A:

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A: Inflation (I) = 2.55% Bank interest rate (R) = 7.75%

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A: Real interest rate = Nominal interest rate-rate of inflation

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Q: real interest rate

A: Formula for Real Interest Rate: Real Interest Rate = Nominal Interest Rate - Inflation Rate

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