Real rate of return or the real interest rate

Assignment Help Business Management
Reference no: EM131750194

John invested $100 last year at a nominal interest rate of 10%. All the money with interest will be paid back this year. Suppose there is an inflation of 5% over the past year.

(1) How much will John receive in total this year? This is the total payment in today's dollar.

(2) Accounting for inflation, how much does the $100 from last year worth in this year? This is the value of initial investment in today's dollar.

(3) The real rate of return or the real interest rate equals to

((total payment in today's dollar) - (value of initial investment in today's dollar)) / (value of initial investment in today's dollar)

Calculate the real interest rate.

(4) Verify that Nominal Interest Rate = Real Interest Rate + Inflation + (Real Interest Rate x Inflation)

(5) If the inflation rate is 20% instead of 5%, is it a good idea for John to make this investment?

Reference no: EM131750194

Questions Cloud

Why were the employees discharged : What must the employees demonstrate to establish a breach of the duty of fair representation? How would that affect the decision of the arbitration board?
Compute the firm weighted average cost of capital : Given the substantial fall in interest rates in recent years, the firm's debt currently has a market price of $75,000,000. The common shares are trading at $38.
Prepare journal entries to record the transactions : Prepare journal entries to record the transactions for January and post them to the ledger accounts
Contrast the two different versions of tracers : compare and contrast the two different versions of tracers that The Joint Commission uses, be sure to include an example in your description.
Real rate of return or the real interest rate : (1) How much will John receive in total this year? This is the total payment in today's dollar.
The predictors of job performance : Provide the predictors of job performance witth definitions and their strengths/weaknesses) for the following
Calculate the book value at the end of year : Using the 150% declining-balance depreciation method, calculate the book value at the end of year 2
Discuss assets instructions myers company provides : Intangibles Total assets Instructions Myers Company provides you with the following condensed balance sheet
Relationship between the charge description master : What is the relationship between the Charge Description Master (CDM) and revenue cycle management? Please provide detail explanation.

Reviews

Write a Review

Business Management Questions & Answers

  Describe the cycle of leadership and specify the knowledge

Describe the cycle of leadership and specify the knowledge, skills and abilities necessary for a leader to master in each stage of the cycle.

  Develop justified answers to the questions

For this activity, you will be asked to develop justified answers to the following questions.

  Metrics that determine whether you get a bonus

As a CEO, one of the metrics that determine whether you get a "bonus" or not is the Return on Assets.

  Monopolistically competitive equilibrium

For each firm, there is a fixed cost $80.00 per day and a marginal cost of $12 per oil change each firm currently maximized its profit by providing.

  What type of database technology will the company need

What type of database technology will the company need to support the new online services? Explain your answer. For example, how will the company keep track of inventory and customer information for sales in the retail versus the online store

  Performance management systems

Performance Management Systems - What is the main issue the Pentagon was hoping to correct with their new performance management system?

  List different kinds of businesses

List different kinds of businesses

  Long-run market equilibrium resulting from shift

An industry is populated by identical firms, facing constant input prices and having all the other characteristics of a perfectly competitive market. Which of the following statements describes the new long-run market equilibrium resulting from a ..

  Compare face-to-face communication and motivation

Compare face-to-face communication and motivation with virtual communication and motivation. What are the advantages and disadvantages of each?

  Research mission and vision statements of different fortune

Using your favorite search engine, research the mission and vision statements of different fortune 500 companies. Then, you will write an essay in which you compare and contrast the mission statements of two companies and the vision statements of ..

  Which value of ethical managers in face of change includes

Which value of ethical managers in the face of change includes In reacting to change this is how an organization can set itself apart to meet customer needs?

  Write a paper that identify the customer and business needs

Write a 750- to 1,250-word scope verification paper in which you identify the customer and business needs as the theme for the project your team selected. Complete the following in your paper.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd