Answered: Assume that the base year is 2015. Good…

Assume that the base year is 2015. Good 2015 Price 2015 Quantity 2016 Price 2016 Quantity $2 250 $3 200 $3 300 $2 400 $4 400 $5 500 A B C 9. What was the inflation rate between the two years?

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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Concept explainers

Interest Rate

When you deposit your money with the bank, the deposit earns you some extra money at the end of the specific period – something more than what you deposited. That amount of money that the bank pays you for keeping the money with the bank is the “interest” and the percentage at which the bank pays you for your amount is called the “interest rate”.

Question

Assume that the base year is 2015.
Good 2015 Price 2015 Quantity 2016 Price 2016 Quantity
$2
250
$3
200
$3
300
$2
400
$4
400
$5
500
A
B
C
9. What was the inflation rate between the two years?
O A) 1 percent
O B) 2 percent
O C) 3 percent
O D) 4 percent
O E) 8 percent
27

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Use these present value tables to answer the question that follow.Below is a table for the present value of $1 at compound interest. Year 6% 10% 12% 1 0.943 0.909 0.893 2 0.890 0.826 0.797 3 0.840 0.751 0.712 4 0.792 0.683 0.636 5 0.747 0.621 0.567 Below is a table for the present value of an annuity of $1 at compound interest. Year 6% 10% 12% 1 0.943 0.909 0.893 2 1.833 1.736 1.690 3 2.673 2.487 2.402 4 3.465 3.170 3.037 5 4.212 3.791 3.605 Using the tables above, what would be the internal rate of return of an investment of $227,460 that would generate an annual cash inflow of $60,000 for the next five years?

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