Assume the inflation rate is 100% per year and the nominal rate of interest is 700% per year. (This was also our apples example from Section 5.2.) Now, assume that there is also a 25% default rate. That is, 1 in 4 apples are returned with worms inside and will therefore not be sellable (and be worth $0). What is your real rate of return? What is the formula?

don't use excel only formula based typing answer.

2. According to an old myth, native Americans sold the island of Manhattan about 400 years ago for $24. If they had invested this amount at an interest rate of 10% per year and average inflation rate of 2.5%, how much would they have today in real values?

8. Assume that S, = 1.60 USD/GBP. How will this spot rate adjust according to PPP if the United Kingdom experiences an inflation rate of 5% while the U.S. experiences an inflation rate of 3%?

Please show equations used. No excel please.

You and your spouse just adopted twin girls, little Heather and Beth. You want to make sure they are taken care of for the next 22 years.  (A)Based on the following information, how much life insurance needs to be purchased for the husband using the income approach, if any?  (B) How much, if any, needs to be purchased for the wife using the income approach?   Assume 3% inflation rate.                Market Labor Value Household Production Value Husband $72,000 $15,000 Wife $15,000 $40,000

Assume that the economy has an annual inflation rate of 5 percent. Are the following investments profitable in real terms? You do not need to explain your answer.   (a) A$1,000 face-value bond, which you purchase at a 30% discount, that pays a monthly coupon of$4.   (b) A$1 million house the increases in price by$45,000 per year. You do not rent out the house, nor do you undertake renovations.   (c) A$1 million house that you renovate for$45,000 over the course of a year, causing the price to increase to$1.1 million.     (d) The spot price of silver is$31 per ounce. You purchase 50 ounces of silver for$1,600, in order to compensate the merchant. Over the year, the spot price of silver rises to$34per ounce, and you are able to sell the silver you have at the spot price.   (e) You purchase a Non-Fungible Token (NFT) for$98 million. The following year, you are able to sell it for$102.5 million