Discuss about the inflation adjusted

Reference no: EM132173505

Question: An investor has two opportunities. An investment project in country A involving an initial investment of $100,000 and an income of $30,000 for six years, or, an investment project involving an initial investment of $150,000 in the US with an annual income of $60,000 for three years. By how many "inflation adjusted" US dollars would this investor be better or worse off, if he invests in the country A project compared to the US project. The prevailing rate of interest in both countries is 15%. Assume that

a. The rate of inflation in the US is constant at 5.5%, and the inflation rate in country A is constant at 4.545 per year.

b. The rate of exchange between the US and country A currency remains the same. Disregard social, stability, economic, and other conditions.

Reference no: EM132173505

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