Please help me to solve this question 3) Solve the following problems involving real rates of return and interest.a) Find freat with 5.5% interest and 2.25% inflation.b)An account pays a 3.75% real interest rate. Find the rate of interest paid during a year wheninflation is 1.95%.c)An account pays a 6.2% real rate of return. If $13100 is deposited on January 1, 2018 and theaccount has an AV of $13,416 on December 31, 2019 find the average annual effective inflationrate of the two years 2018-9.d) Jon has $12500 today. If he invests his money at 6% interest and inflation is 2% per year, whenwill his purchasing power be twice what it is today?

Here, To Find: Part A. Real rate of interest =? Part B. Nominal rate of interest =? Part C. Average…

Answered: Solve the following problems involving…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The effective annual rate of interest on a bank account is 2.5% and the general rate of inflation is 4%. b) Using the information provided directly above, explain the concept of a ‘real rate of return’.
If you borrow $9000 at an annual percentage rate (APR) of r (as a decimal) from a bank, and if you wish to pay off the loan in 3 years, then your monthly payment M (in dollars) can be calculated using: M = 9000 (er/12-1) / 1 - e-3r 1) Describe what M (0.035) would represent in terms of the loan, APR, and time. 2) If you are only able to afford a max monthly payment of $300, describe how you could use the above formula to figure out what the highest interest rate the bank could offer you and you would still be able to afford the monthly payments. In addition, determine the maximum interest rate that you could afford.
Savings institutions often state a nominal rate, which can be thought of as a simple annual interest rate, and the effective interest rate, which is the actual interest rate earned due to compounding. Given the nominal rate, it is easy to calculate the effective interest rate as follows. Assume that $1 is invested in an account paying an interest rate of 6% compounded monthly. Using the compound interest formula A = P 1+ with P 0.06) 12 = 1, r = 0.06, m = 12, and n = 12, A = |1+ rate is 1.0617 -1= 0.0617, or 6.17%. Find the effective interest rate for the investments with a nominal yield of 10%, compounded quarterly. s 1.0617. So the effective interest 12 The effective annual yield is%. (Round to two decimal places as needed.)
Answer the following Compound Interest problem using the provided formula ONLY. Show your complete solution. 7. Compound Interest A. If the sum of P 12,000 (pesos) is deposited in an account earning interest rate of 9% compounded quarterly, what will it become after 1 year? B. In the previous problem, what is the effective rate? C. What is then the equivalent nominal interest rate if compounded monthly?
Give typing answer with explanation and conclusion A deposit of $450 earns the following interest rates: 9 percent in the first year. 7 percent in the second year. 6 percent in the third year. What would be the third year future value?
A certain some of money P draws interest compounded continuously. If a certain time there are Po dollars in the account, determine the time when the financial attains the value of 2Po dollars if the annual interest rate at 2%
Savings institutions often state a nominal rate, which can be thought of as a simple annual interest rate, and the effective interest rate, which is the actual interest rate earned due to compounding. Given the nominal rate, it is easy to calculate the effective interest rate as follows. Assume that $1 is invested in an account paying an interest rate of 6% compounded monthly. Using the compound interest formula A =P 1+ m with P = 1, r =0.06, m 12, and n 12 0.06 = 12, A =1 + 12 1.0617. So the effective interest rate is 1.0617 - 1 = 0.0617, or 6.17%. Find the effective interest rate for the investments with a nominal yield of 10%, compounded quarterly. The effective annual yield is %. (Round to two decimal places as needed.) Enter your answer in the answer box and then click Check Answer. Check Answer All parts showing Clear All javascript:doExercise(12); avascript:doExercise(14); Type here to search
A bank pays a simple interest rate of 4.1% on 30 to 179-day GICs of at least $100,000. What is the effective annualized rate of return:a) On a 40-day GIC?b) On a 160-day GIC?
The principal P is borrowed at simple interest rate r for a period of time t. Find the loan's future value, A, or the total amount due at time t. P=$4000, r= 7.5%, t= 9 months The future value is $ (Simplify your answer. Type an integer or a decimal.)
Suppose you borrow from a bank $1,756.06 today (t=0). You agree to pay back $3,637.64 in 4 years (t=4). The interest rate (%) that the bank charge you is closest to ________%. Input your answer without the % sign and round your answer to two decimal places.
You borrow money on a self liquidating installment loan (equal payments at the end of each year, each payment is part principal part interest) Loan amount Interest Rate $632,000 15.5% Life 49 years Date of Loan January 1, 2021 Use the installment method - not straight line Do NOT round any interrmediate numbers. Do NOT turn this into a monthly problem. Do NOT put in minus signs, answer all positive numbers.
Suppose that you want to take out a loan and that your local bank wants to charge you an annual real interest rate equal to 3%. Assuming that the annualized expected rate of inflation over the life of the loan is 1%, determine the nominal interest rate that the bank will charge you. What was the actual real interest rate on the loan if, over the life of the loan, actual inflation is 0.5%?

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