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nadezda [96]
3 years ago
15

Sally has invested $10,000 now and wants to earn a real interest rate of 10% per year. Assume that the inflation rate is 7% per

year. Determine the future worth Sally has to receive 10 years from now? a) $62, 338 b) Unknown c) $42, 338 d) $52, 338
Business
1 answer:
hodyreva [135]3 years ago
4 0

Answer:

Results are below.

Explanation:

Giving the following information:

Inflation rate= 7%

Real rate of return= 10%

Present value (PV)= $10,000

Number of periods (n)= 10 years

<u>The real rate of return incorporates the effect of the inflation rate. Therefore, the nominal rate of return:</u>

Nominal rate of return= 0.1 + 0.07= 17%

<u>To calculate the Future Value, we need to use the following formula:</u>

FV= PV*(1 + i)^n

FV= 10,000*(1.17^10)

FV= $48,068.28

This is the n<u>ominal valu</u>e received after ten years.

<u>If Sally wants to determine the real value of the investment after 10 years, we must use the real rate of return:</u>

<u></u>

FV= 10,000*(1.1^10)

FV=$25,937.42

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Memphis Company's May sales budget calls for sales of $870,000. The store expects to begin May with $47,000 of inventory and to
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Answer:

The budgeted cost of merchandise purchases is $527,000

Explanation:

The cost of merchandise purchases for May can be computed by first of all calculating the costs of goods sold,then by deducting closing inventory from costs of good sold and adding opening inventory,just like working backwards.

Sales                                              $870,000

less margin($870,000*40%)     ($348,000)

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Read 2 more answers
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