Suppose the bank will give you 5 percent interest rate for your money on deposit and the rate of inflation is 3 percent. In this case you must sacrifice €100 euros of current consumption in order to enjoy: A €105 of future consumption B €5 of future consumption C €102 of future consumption in real terms D €108 of future consumption in real terms

Q: Which is the better option if the interest rate is r=0.10 (r=10%)? Show all work used to arrive at…

A: Option 1: Receives $1000 at 10% today But if we invest the $1000 received today for 5 years

Q: 3. Time Value of Money Assume that ten years from now, you will need $10,000 and that your bank…

A: The concept of the time value of money states that money today has more value than the same amount…

Q: Suppose you had ₱100 in a savings account and the interest rate was 2% per year. After 5 years, how…

A: Future Value refers to the compounded value of a single cash flow received today or multiple cash…

Q: A friend asks to borrow $54 from you and in return will pay you $57 in one year. If your bank is…

A: Future value of an amount is calculated as follows:  FV = PV*(1+r)t Where,  FV = Future value of…

Q: Suppose that if you purchase a US Treasury bond, it will pay you a one-time payment of $5000 in 10…

A: A Treasury Bond is a bond issued by the Government of USA. It carries no risk of default and are…

Q: Assume that you will receive $2500 at the end of 6 years and want to know the present value (PV) of…

A: Present value refers to the current value of a future sum of money, taking into account a specified…

Q: Determine the present value, P, you must invest to have the future value, A, at simple interest rate…

A: calculation of present value P are as follows

Q: If the risk-free rate of interest (r.) is 10%, then you should be indifferent between receiving $100…

A: Given: Risk free interest rate (rf) = 10% =0.10 Payment in 1 year = $100

Q: Suppose the interest rate is 4.3%. a. Having $450 today is equivalent to having what amount in one…

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

Q: Max the mouse needs $10,000 in 5 years. How much should Max deposit today if the bank has a simple…

A: Simple interest is the type of interest that is calculated on the original amount invested and not…

Q: If you borrow $6,000 for 4 years and agree to pay back $8000, what simple interest rate will you end…

A: Simple interest is the type of interest that is calculated only on the principal amount. Simple…

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: If you deposit $3,500 monthly into a savings account which earns 8.25% interest rate compounded…

A: The future value of annuity refers to the future value of a series of payments. The future value can…

Q: You are considering a mortgage for 30 years with initial value $280, 000, and annual interest rate…

A: The objective of the question is to determine how long it will take for the lower monthly payments…

Q: Suppose you put £1,000 into a bank account paying simple interest at a rate of 8% per annum. How…

A: Simple interest refers to the method of calculation of the interest earned where the principal…

Q: suppose you have 100 dollars in a saving account and the bank adds 10 percent per year to the…

A: As per Time Value of money, Future value = Present value * (1+rate)^n

Q: t=1/2 you have $1300

A: Initial investment at t=0: $1000Additional investment at t=1/2: $5000Account balance at t=1/2:…

Q: None

A:

Q: ou decide to invest $10.5k today into a security that will make fixed annual payments to you of…

A: Today's investment amount = $10,500Interest rate = 7.5%Annual payment = $2,152

Q: Suppose you invest $210,000 in an annuity that returns constant annual payments over 6 years, with…

A: We will apply the concept of time value of money in this case.In an annuity you make an initial…

Q: Suppose that you wish to buy a new home that will cost you $476,301. You must put $80,000 down, and…

A: Negative amortization is where the principal to be paid increases due to non payment of interest due…

Q: You plan to borrow $1,000 from a bank. In exchange for $1,000 today, you promise to pay $1,130 in…

A: The objective of the question is to understand the cash flow timeline from both the borrower's and…

Q: Suppose you had ₱100 in a savings account and the interest rate was 2% per year. After 5 years, how…

A: Future Value refers to the compounded value of a single cash flow received today or multiple cash…

Q: suppose lender larry values $1 today equal to $2 a month from now, and borrower barry vlaues $1…

A: The Fisher Equation, named after economist Irving Fisher, states the relationship between nominal…

Q: You decide to invest $100 into a savings account with an interest rate of 2% annually in2015. The…

A: present value in savings account = $100 interest rate annually = 2% future value = $120 time period…

Q: Suppose that you want to take out a loan and that your local bank wants to charge you an annual real…

A: Compute the nominal interest rate: Nominal interest rate is calculated by using following formula:

Q: Time value. You can deposit $12,000 into an account paying 6% annual interest either today or…

A: The amount that a present investment will gain in value over time when kept in a compound interest…