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Nezavi [6.7K]
3 years ago
5

Assume the nominal rate was 11.50% and the inflation rate was 3%. Using the Fisher Effect, what was the real rate

Business
1 answer:
Finger [1]3 years ago
3 0

The real rate was 8.25%.

Real rate  = 8.25%

Dear Student

Thank you for  using Chegg

Please find below the answer

Statement showing Computations

Particulars

 Fisher formula is (1 + nominal rate) = (1 + real rate) x (1 + inflation rate),

(1+.115) = (1 + realrate) *(1+.03)

(1.115) = (1 + realrate) *(1.03)

1.0825 = 1 + real rate

Real rate  = 8.25%.

The nominal interest rate (or interest rate) is the rate of increase in money you pay lenders using borrowed money. Nominal interest rates are often used by banks to represent interest rates on various loans and investments. For example, if your loan has a nominal interest rate of 5%, you can expect to pay $50 in interest for every $1,000 you borrow. At the end of the year he will pay $1,050.

The real interest rate is the interest rate that takes inflation into account. This means it is adjusted for inflation and reflects the real interest rate of a bond or loan. Simply put, this rate reflects the rate of return after taking inflation into account.

Learn more about the inflation rate here: brainly.com/question/777738

#SPJ4

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Indicate which type of unemployment the following describe.
Mandarinka [93]

Answer:

a. Structural unemployment

b. Seasonal unemployment

c. Cyclical unemployment

d. Seasonal unemployment

Explanation:

The unemployment George is involved in is structural because the perceived value and skills George possess is no more needed in the steel industry where he works and at Chicago land area where he moved to since there are now newer skills that could make work more efficient within the steel firms.

Leo in his case is battling with a seasonal unemployment as there are industries that operates in certain season(Time) of the year and not others. in January, when the winter is intense, construction work might not be feasible due to the high rate of snow fall in the period.  

Kim suffered from a cyclical unemployment because there is a need to prioritize some things above the other due to the recession in the country. people will focus more on how to solve their immediate problem such as putting food on the table and clothe as well as housing, The need for the purchase of computers will drastically drop at this point in time.

Lastly, Becky, a recent graduate from college is also suffering from a seasonal unemployment because of the time she graduated from college.

7 0
3 years ago
The risk free rate of return is 2.5% and the market risk premium is 8%. Rogue Transport has a beta of 2.2 and a standard deviati
4vir4ik [10]

Answer:

20.1%

Explanation:

In capital asset prcing model (CAPM), cost of equity (or cost of retained earnings in this context) is calculated as below:

<em>Cost of equity = risk-free rate of return + beta x (market index return - risk-free rate of return)</em>

Please note that <em>(market index return - risk-free rate of return)</em> is equal to <em>market risk premium</em>

Putting all the number together, we have:

Cost of equity/retained earnings = 2.5% + 2.2 x 8% = 20.1%

<em>Note: The dividend growth rate, tax rate & stock standard deviation is not relevant in answering the question.</em>

6 0
3 years ago
The common stock of Dayton Repair sells for $43.19 a share. The stock is expected to pay $2.20 per share next year when the annu
mihalych1998 [28]

Answer: 7.35%

Explanation:

Based on the information given, the market rate of return on this stock will be calculated as:

= (D1/P0) +G

where,

D1= Dividend at year 1 = 2.20

P = price at present =43.19

G = dividend growth rate =2.25%

We then slot the figures into the formula and we will get:

= (D1/P0) +G

= (2.20 / 43.19) + 2.25%

= 0.051 + 2.25%

= 5.1% + 2.25%

= 7.35%

Therefore, the market rate of return will be 7.35%.

4 0
3 years ago
Forming a joint venture with an existing foreign company offers all of the following advantages excepta.providing control over p
natka813 [3]

Answer:

The correct answer is the option C: Requiring less commitment from all parties involved in the joint venture.

Explanation:

To begin with, the name of "joint venture" in the field of business refers to the method and strategy whose process consists of incorporating two or more parties into one only form of company with the final purpose of increasing the sales of every party included in the agreement and doing that by different ways. Moreover, generally this strategy has its focus on the fact of entering a new market or acquiring new management that will come with more resources and more. So that is why that it brings a lot of advantages as stated in the case presented but absolutely not less commintment from every party involved in it.

3 0
3 years ago
Your company wants to set aside a fixed amount every year to a sinking fund to replace a piece of industrial equipment costing $
olga2289 [7]

Answer:

$4,5243.63

Explanation:

Data provided in the question:

Future value = $250,000

Interest rate = 5% = 0.05

Time = 5 years

Now,

Future value = C\times\left[ \frac{(1+i)^{n}-1}{i} \right]

here,

C = Regular deposit amount

i = Interest rate per period

n = number of periods

Future value = C\times\left[ \frac{(1+i)^{n}-1}{i} \right]

or

$250,000 = C\times\left[ \frac{(1+0.05)^{ 5}-1}{ 0.05} \right]

$250,000 = C\times\left[ \frac{ 1.05^{ 5}-1}{ 0.05} \right]

$250,000 = C\times\left[ \frac{ 1.276282 - 1}{ 0.05} \right]

$250,000 = C × 5.52564

or

C = \frac{ 250000 }{ 5.52564 }

C = $4,5243.63

7 0
4 years ago
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