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The annual percentage of profit on an investment that has been prorated for inflation is known as the real rate of return. As a result, the real rate of return provides an accurate representation of the real purchasing power of a particular sum of money over time.
The investor can calculate how much of a nominal return is real return by adjusting the nominal return to account for inflation.
Real rate of return is one plus nominal rate of return.
(1 plus the inflation rate) (1 plus 0.45 = (1 plus 0.30)
(1 + rate of inflation)
The inflation rate is equal to [(1 + 0.45 / (1 + 0.30)]. 1 Inflation rate equals 0.1154 percent, or 11.54%
Real rate of return has the drawback that its value is unknown until after the event has taken place. That is to say, inflation is a trailing indicator for any particular period, meaning it can only be measured after the relevant period has ended.
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Answer:
Consider the following calculations
Explanation:
Co = low fare = $ 100
Cu = high fare - low fare = 400 - 100 = $ 300
Critical ratio = Cu/(Cu+Co) = 300/(300+100) = 0.75
In the table, look for F(q) >= 0.75 , that value is 0.792 and corresponding value of q = 12. Therefore,
Optimal protection level = 12
Refer the table for q=12, Expected shortage, L(q) = 0.5
Expected high fare seats to be sold = Mean demand - Expected shortage = 10-0.5 = 9.5
Probability of a full flight = 0.792
Answer:
He may still be covered in some cases.
He faces more risk than insured people do.
He may have to take precautions but many factors are beyond his control.
Not being able to afford insurance was a factor in him not being covered.
Explanation:
I got it correct
Answer:
real rate of return = 4.77%
Explanation:
you purchased the bond at $810 with 14 years to maturity
now, 1 year later the bond's price is:
- PV of coupon payment = $1,000 / 1.11¹³ = $257.51
- PV of coupon payments = $80 x 6.7499 (PV annuity factor, 11%, 13 periods) = $539.99
market value = $797.50
total nominal returns = $80 (coupon payment) + ($797.50 - $810) = $67.50
the real rate of return = {[1 + ($67.50/$810)] / (1 + 3.4%)} - 1 = 4.77%
