What was your exact real return

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Reference no: EM131979052

1. An annuity is offered that will pay you $20,000 once per year, at the end of the year, for 25 years. The first payment will arrive one year from now. The last payment will arrive 25 years from now. Suppose your annual discount rate is i = 5.5%, how much are you willing to pay for this annuity?

2. An investment gives you an 11.25% nominal return over 1 year. There was 2.5% inflation over that year. What was your exact real return?

Reference no: EM131979052

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