Question

A medical student will complete her residency and go into medical practice in 4 years. She needs to purchase expensive medical equipment to start the practice. In order to determine the amount of money that must be invested today to meet this capital need, all of the following are needed except:___________.1. Current cost of medical equipment2. Assumed rate of return3. Expected inflation rate

Answer 1

Answer:

3. Expected inflation rate

Explanation:

To determine the amount of money that the medical student must invest today to meet this capital need, she needs to know the current cost of medical equipment to have the the amount she needs to be able to buy the equipment. Also, she has to know the assumed rate of return to determine the amount of interest she will receive as the formula to calculate the money she needs today is:

PV= FV/(1+r)^n, where:

PV= present value

FV= future value

r= rate of return

n= number of periods of time

According to this, the answer is that the option that she doesn't need to find the amount of money that must be invested today to meet this capital need is the expected inflation rate as the formula to calculate the present value considers the amount she will need, the rate of return and the period of time.