You are trying to estimate the real interest rate for the mining industry products andproceed as follows. You consider buying coal and gold in equal proportion, spending$1000 on coal, and another $1000 on gold in today's dollars. In 4 years from now, theselling values in actual dollars are predicted to be $1,270 (coal) and $1,210 (gold).Inflation (for coal) is 1.1% per year, for the next 4 years. For gold, the gold price indexis predicted to rise in the next 4 years from the current 417 points to 431 points.Compute the estimated real interest rate, as a number, with 0.001 precision.Hint: Calculate real interest rate for the cash flow: 1) invest now $1000+$1000; 2) sellin 4 years coal and gold and obtain appropriate cash flow.

The real interest rate can be defined as a measure of the return on an investment or the cost of…

You are trying to estimate the real interest rate for the mining industry products an proceed as follows. You consider buying coal and gold in equal proportion, spendin $1000 on coal, and another $1000 on gold in today's dollars. In 4 years from now, selling values in actual dollars are predicted to be $1,270 (coal) and $1,210 (gold). nflation (for coal) is 1.1% per year, for the next 4 years. For gold, the gold price ind s predicted to rise in the next 4 years from the current 417 points to 431 points. Compute the estimated real interest rate, as a number, with 0.001 precision. Hint: Calculate real interest rate for the cash flow: 1) invest now $1000+$1000; 2) n 4 years coal and gold and obtain appropriate cash flow.

You are trying to estimate the real interest rate for the mining industry products an proceed as follows. You consider buying coal and gold in equal proportion, spendin $1000 on coal, and another $1000 on gold in today's dollars. In 4 years from now, selling values in actual dollars are predicted to be $1,270 (coal) and $1,210 (gold). nflation (for coal) is 1.1% per year, for the next 4 years. For gold, the gold price ind s predicted to rise in the next 4 years from the current 417 points to 431 points. Compute the estimated real interest rate, as a number, with 0.001 precision. Hint: Calculate real interest rate for the cash flow: 1) invest now $1000+$1000; 2) n 4 years coal and gold and obtain appropriate cash flow.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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