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- Calculate the rate of inflation or delation between 2014 and 2015.Give an example of a good or service that has increased in price since the time when you were young. Describe the good or service and tell us what price the good cost when you were young compared to today. Calculate the percentage change in price (the inflation rate for the good in question) over the time period you are describing.A rich relative has bequeathed you a growing perpetuity. The first payment will occur in a year and will be $3,000. Each year after that, you will receive a payment on the anniversary of the last payment that is 4% larger than the last payment. This pattern of payments will go on forever. Assume that the interest rate is 15% per year. a. What is today's value of the bequest? b. What is the value of the bequest immediately after the first payment is made? ARCKICHI a. What is today's value of the bequest? Today's value of the bequest is $(Round to the nearest dollar. b. What is the value of the bequest immediately after the first payment is made? The value of the bequest immediately after the first payment is made is $ (Round to the nearest dollar.)
- Michelle has won a prize that will pay her $1000 per year, starting one year from today,for 15 years. Inflation is expected to be 3% per year for the next 15 years, and her interest rate is 5% per year. What is the present value of this prize today? (Treat the 3% inflation as a negative 8, thus g = -3%, and i is 5%)A loan has an interest rate of 8%, and the inflation rate is 2.4%. What is the loan’s real interest rate adjusted for inflation?You work for a bank that has just made two loans. In one, you lent $900 today in return for $1200 in one year. In the other, you lent $900 today in return for $10000 in 20 years. The difference between the loan amount and repayment amount is based on an interest rate of 8% per year. Imagine that immediately after you make the loans, news about economic growth is announced that increases inflation expectations, so that the market interest rate for loans like these jumps to 10%. Loans make up a major part of a bank’s assets, so you are naturally concerned about the value of these loans. What is the effect of the interest rate change on the value to the bank of the promised repayment of these loans?
- Search for the “World Economic Outlook Database” on the internet and locate the most recent version. Use this database to select inflation data (units of percentage change) for Germany, Japan, and the United States for the period 1990 to 2010. Construct a table of annual inflation rates for these countries. Now construct a graph using annual inflation rates on the vertical axis and the year on the horizontal axis. Plot the annual inflation rates from your table in three separate lines on the same graph. How would you compare the experiences of these three countries based on your graph?Assume that a loaf of bread cost $0.25 in 1950 and an equivalent loaf of bread cost $2.25 in 2000. Based on the cost of this loaf of bread, what is the value of a 1950-dollar in 2000-dollars?Assume that Sarah agrees to lend $100 to Sam for one year. Sam agrees to pay Sarah $117 at the end of the year. If inflation over that one year is 8%, what real rate of interest does Sarah earn on her $100?
- Suppose the real rate for Treasury bills is 6 percent and the inflation rate is 1.4 percent. What is rate do you earn on these bills before inflation? Multiple Choice8.23%8.61%7.48%6.36%6.74%← Use graphical approximation techniques to answer the question. When would an ordinary annuity consisting of quarterly payments of $430.20 at 8% compounded quarterly be worth more than a principal of $4600 invested at 5% simple interest? The annuity would be worth more than the principal in approximately (Round to one decimal place as needed.) years.Intro In order to save for your retirement, you want to save $2,000 every year for 15 years, starting one year from now. The annual interest rate on your savings account is 8%. Part 1 How much money will you have in your account in 15 years? 0+ decimals Submit
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