Answer:
Nominal interest rate (n) = 10% = 0.10
Inflation rate (i) = -2% = -0.02
Real interest rate (r) = ?
Application of Fisher's Equation
(I + n) = (1 + r)(1 + i)
(1 + 0.10) = (1 + r)(1 + -0.02)
1.10 = (1 + r)(0.98)
<u>1.10</u> = 1 + r
0.98
1.1224 = 1 + r
1.1224 - 1 = r
r = 0.1224 = 12.24%
Jimmer's real income will change by 12.24% next year.
Explanation:
In the determination of the rate of change in real income, there is need to apply Fisher's equation. The nominal rate and inflation rate have been given, thus, we will make the real rate the subject of the formula.
Explanation:
why is this so much who assigned you this
Answer:
The amount of interest paid is $ 1,500.
Explanation:
Given that Perry Mazza wants to borrow $ 30,000 from the bank, and the interest rate is 5% and the term is for 5 years, to determine what is the amount of interest paid, the following calculation must be performed:
(30,000 x 5) / 100 = X
150,000 / 100 = X
1,500 = X
Therefore, the amount of interest paid is $ 1,500.
Answer:
$71.03
Explanation:
To find the current share price we need to find the value of future dividends first and then discount it by the given rate of return
DATA
Growth rate = g = 20%
Time period = 3 years
Required return = 11%
Current dividend = Do = $1.45
Share price =?
Solution
Future dividend = Current dividend ( 1 + growth rate)
D1 = (1.45 x 1.20) = $1.74
D2 = (1.74 x 1.20) = $2.088
D3 = (2.088 x 1.20) = $2.5056
Value after year 3 = (D3 x Growth rate) / (Required return-Growth rate)
Value after year 3 = (2.5056*1.08) / (0.11-0.08)
Value after year 3 =$90.2
current share price = Future dividends x Present value of discounting factor
current share price = (1.74/1.11)+($2.088/1.11^2)+(2.5056/1.11^3)+($90.2/1.11^3)
current share price = 1.56 + 1.69 + 1.83 + 65.95
current share price =$71.03
