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Scilla [17]
3 years ago
13

Assume the real rate of interest is 3.00% and the inflation rate is 6.00%. What is the value today of receiving 14,488.00 in 13.

00 years?
Business
1 answer:
OverLord2011 [107]3 years ago
6 0

Answer:

Present Value= $15,874.25

Explanation:

Giving the following information:

Assume the real rate of interest is 3.00% and the inflation rate is 6.00%. What is the value today of receiving 14,488.00 in 13.00 years?

<u>This is a rare case where the interest rate is negative:</u>

Interest rate= 0.03 - 0.06= -0.03

Having said this, the present value is higher than the final value:

PV= FV/ (1+i)^n

PV= 14,488/ 0.97^3= $15,874.25

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