1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
stich3 [128]
3 years ago
6

Monique lends Taylor $1,200 on March 15, 2009. Taylor is expected to return $1,260 on March 14, 2010. Monique expects inflation

over the one-year period to be 2%. What is the real interest rate that Monique desires
Business
2 answers:
Irina-Kira [14]3 years ago
8 0

Answer:

2.94%

Explanation:

Real Rate of Return is the actual rate of return that an investor gets from investment excluding any inflation effect.

Present Value = PV  = $1,200

Future Value = FV = $1,260

Numbers of period = n = 1 year

Use Following Formula to calculate the nominal Interest rate

FV = PV x ( 1 + r )^n

$1,260 = $1,200 x ( 1 + r )

$1,260 / $1,200 = 1+r

1.05 = 1 + r

r = 1.05 - 1 = 0.05 = 5%

As the 5% is the Nominal Interest rate

we Will Use the Fisher Effect formula to calculate the real Interest rate

1 + Nominal Interest Rate = ( 1 + Real Interest Rate ) x ( 1 + Inflation Rate )

1 + 5% = ( 1 + Real Interest Rate ) x ( 1 + 2% )

1 + 0.05 = ( 1 + Real Interest Rate ) x ( 1 + 0.02 )

1.05 = ( 1 + Real Interest Rate ) x 1.02

1 + Real Interest Rate  = 1.05 / 1.02

1 + Real Interest Rate = 1.0294

Real Interest Rate = 1.0294 - 1

Real Interest Rate = 0.0294 = 2.94%  

Neporo4naja [7]3 years ago
3 0

Answer:

Real rate of interest  =2.9%

Explanation:

The fishers' equation expresses the relationship between nominal interest rate , real interest rate and the inflation rate

<em>The nominal rate of interest </em>

= (1260/1200 - 1) × 100

= 5%

The fisher's equation is given as

(I+N) = (1+R)(1+F)

N- Nominal rate of interest

R- Real rate of interest

F- Inflation rate

<em>Real rate of Interest</em>

= (1+N)/(1+F) - 1

= 1.05/(1.02) -1

=2.9%

You might be interested in
On January 1, 2011, The Miller Corporation purchased 300,000 shares of The Mayfair Corporation for $5.7 million. The investment
kow [346]

Answer:

2011 Value of investment in Mayfair

= Beginning investment value + Portion of Mayfair net income - Portion of Mayfair dividends

= 5,700,000 + (40% * 2,250,000) - (300,000 shares * 0.15)

= $‭6,555,000‬

2012 Value of investment

= Beginning investment value + Portion of Mayfair net income - Portion of Mayfair dividends

= 6,555,000 + (40% * -180,000) - (300,000 * 0.15)

= $‭6,438,000‬

7 0
2 years ago
Partnerships refer to more than one owner. a limited partnership ______________.
snow_lady [41]
Is it a multiple choice question? Anyway, this is the definition of a limited partnership:

<span>A Limited Partnership is a partnership consisting of a general partner, who manages the business and has unlimited personal liability for the debts and obligations of the Limited Partnership, and a limited partner, who has limited liability but cannot participate in management.</span>
7 0
3 years ago
Corporate social responsibility describes the firm's:
goldenfox [79]

Answer:

2. concern for the welfare of society.

Explanation:

Corporate social responsibility refers to a concept that helps a company to take into account environment and social concerns in the business activities to make valuable contributions to society. According to this, the answer is that corporate social responsability describes the firm's concern for the welfare of society.

8 0
3 years ago
What must be marked on ready to eat bags
zysi [14]
The expiration date must be marked on ready to eat bags.
5 0
3 years ago
Please answer i m confused
valentinak56 [21]

False heebejeebiesweebies

4 0
3 years ago
Read 2 more answers
Other questions:
  • One reason many companies do not organize themselves as an s corporation is that this form of business:
    11·1 answer
  • Nigel currently has a balance of $668.47 in an account he has held for 15 years. he opened the account with an initial deposit o
    15·1 answer
  • Rural internet access, with one dominant provider that faces very little competition, is a good example of – market. it function
    6·2 answers
  • Henry Ford had a big influence in what era
    12·1 answer
  • An instance where sellers should work to keep relationships with consumers is when they feel that the product
    12·1 answer
  • Why was hop frog a triplicate treasure to the kink how did the gesture get his name
    12·1 answer
  • Total revenue decreases as the price of a good increases. true or false
    10·1 answer
  • Here are incomplete financial statements for Pharoah Company. Calculate the missing amounts. PHAROAH COMPANY Balance Sheet Asset
    9·1 answer
  • True or false: a firm with a capital structure containing 70% retained earnings has a marginal cost of capital of $50,000. This
    5·1 answer
  • _____ is the practice of using team selling to focus on the firm's most important customers so as to build mutually beneficial,
    12·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!