The nominal average return Introduction: The nominal rate of return refers to the rate of return on an investment before adjusting the inflation rate. The rate at which the inflation increases is the inflation rate . The Fisher effect helps to establish a relationship between the nominal rate of return, inflation, and the real rate of return.

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Answer 1

Question

Chapter 12, Problem 5QP

a)

Summary Introduction

To determine: The nominal average return

Introduction:

The nominal rate of return refers to the rate of return on an investment before adjusting the inflation rate.

The rate at which the inflation increases is the inflation rate. The Fisher effect helps to establish a relationship between the nominal rate of return, inflation, and the real rate of return.

b)

Summary Introduction

To determine: The real average return.

Introduction:

The real rate of return refers to the rate of return on an investment after adjusting the inflation rate.

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Question 25 Jasmine bought a house for $225 000. She already knows that for the first $200 000, the land transfer tax will cost $1650. Calculate the total land transfer tax. (2 marks) Land Transfer Tax Table Value of Property Rate On the first $30 000 0% On the next $60 000 0.5% (i.e., $30 001 to $90 000) On the next $60 000 1.0% (i.e., $90 001 to $150 000) On the next $50 000 1.5% (i.e., $150 001 to $200 000) On amounts in excess of $200 000 2.0% 22 5000–200 000. 10 825000 2.5000.00 2 x 25000 =8500 2 ma

Question 25 Jasmine bought a house for $225 000. She already knows that for the first $200 000, the land transfer tax will cost $1650. Calculate the total land transfer tax. (2 marks) Land Transfer Tax Table Value of Property Rate On the first $30 000 0% On the next $60 000 0.5% (i.e., $30 001 to $90 000) On the next $60 000 1.0% (i.e., $90 001 to $150 000) On the next $50 000 1.5% (i.e., $150 001 to $200 000) On amounts in excess of $200 000 2.0% 225000–200 000 = 825000 25000.002 × 25000 1= 8500 16 50+ 500 2 marks

Suppose you deposit $1,000 today (t = 0) in a bank account that pays an interest rate of 7% per year. If you keep the account for 5 years before you withdraw all the money, how much will you be able to withdraw after 5 years? Calculate using formula. Calculate using year-by-year approach. Find the present value of a security that will pay $2,500 in 4 years. The opportunity cost (interest rate that you could earn from alternative investments) is 5%. Calculate using the formula. Calculate using year-by-year discounting approach. Solve for the unknown in each of the following: Present value Years Interest rate Future value $50,000 12 ? $152,184 $21,400 30 ? $575,000 $16,500 ? 14% $238,830 $21,400 ? 9% $213,000 Suppose you enter into a monthly deposit scheme with Chase, where you have your salary account. The bank will deduct $25 from your salary account every month and the first payment (deduction) will be made…

Answer 2

Question

Chapter 12, Problem 5QP

a)

Summary Introduction

To determine: The nominal average return

Introduction:

The nominal rate of return refers to the rate of return on an investment before adjusting the inflation rate.

The rate at which the inflation increases is the inflation rate. The Fisher effect helps to establish a relationship between the nominal rate of return, inflation, and the real rate of return.

b)

Summary Introduction

To determine: The real average return.

Introduction:

The real rate of return refers to the rate of return on an investment after adjusting the inflation rate.

Expert Solution & Answer

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Answer 3

Question

Chapter 12, Problem 5QP

a)

Summary Introduction

To determine: The nominal average return

Introduction:

The nominal rate of return refers to the rate of return on an investment before adjusting the inflation rate.

The rate at which the inflation increases is the inflation rate. The Fisher effect helps to establish a relationship between the nominal rate of return, inflation, and the real rate of return.

b)

Summary Introduction

To determine: The real average return.

Introduction:

The real rate of return refers to the rate of return on an investment after adjusting the inflation rate.

Expert Solution & Answer

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Answer 4

Question

Chapter 12, Problem 5QP

a)

Summary Introduction

To determine: The nominal average return

Introduction:

The nominal rate of return refers to the rate of return on an investment before adjusting the inflation rate.

The rate at which the inflation increases is the inflation rate. The Fisher effect helps to establish a relationship between the nominal rate of return, inflation, and the real rate of return.

b)

Summary Introduction

To determine: The real average return.

Introduction:

The real rate of return refers to the rate of return on an investment after adjusting the inflation rate.

Expert Solution & Answer

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Answer 5

Chapter 12, Problem 5QP

a)

Summary Introduction

To determine: The nominal average return

Introduction:

The nominal rate of return refers to the rate of return on an investment before adjusting the inflation rate.

The rate at which the inflation increases is the inflation rate. The Fisher effect helps to establish a relationship between the nominal rate of return, inflation, and the real rate of return.

b)

Summary Introduction

To determine: The real average return.

Introduction:

The real rate of return refers to the rate of return on an investment after adjusting the inflation rate.

Answer 6

Chapter 12, Problem 5QP

a)

Summary Introduction

To determine: The nominal average return

Introduction:

The nominal rate of return refers to the rate of return on an investment before adjusting the inflation rate.

The rate at which the inflation increases is the inflation rate. The Fisher effect helps to establish a relationship between the nominal rate of return, inflation, and the real rate of return.

Answer 7

Chapter 12, Problem 5QP

a)

Summary Introduction

To determine: The nominal average return

Introduction:

The nominal rate of return refers to the rate of return on an investment before adjusting the inflation rate.

The rate at which the inflation increases is the inflation rate. The Fisher effect helps to establish a relationship between the nominal rate of return, inflation, and the real rate of return.

Answer 8

b)

Summary Introduction

To determine: The real average return.

Introduction:

The real rate of return refers to the rate of return on an investment after adjusting the inflation rate.

Answer 9

b)

Summary Introduction

To determine: The real average return.

Introduction:

The real rate of return refers to the rate of return on an investment after adjusting the inflation rate.

Answer 10

Expert Solution & Answer

Answer 11

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Answer 12

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Answer 13

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To determine: The real average return.

Introduction:

The real rate of return refers to the rate of return on an investment after adjusting the inflation rate.

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Chapter 12 Solutions

Concept explainers

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To determine: The real average return. Introduction: The real rate of return refers to the rate of return on an investment after adjusting the inflation rate.

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Chapter 12 Solutions

To determine: The real average return.

Introduction:

The real rate of return refers to the rate of return on an investment after adjusting the inflation rate.