What is the exact real rate of return

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1. If the nominal interest rate is 7% per year and the inflation rate is 2% per year, what is the exact real rate of return?

2. The inflation rate is 1.5% per year. The real rate of return is 2.0% per year. A perpetuity project that paid $100 this year will provide income that grows by the inflation rate. Show what this project is truly worth. Do this in both nominal and real terms. (Be clear on what never to do.)

Reference no: EM131234428

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