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You will receive $100 from a savings bond in 3 years. The nominal-(Answered)

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You will receive $100 from a savings bond in 3 years. The nominal interest rate is 8.9%.


a.

What is the present value of the proceeds from the bond??(Do not round intermediate calculations. Round your answer to 2 decimal places.)


??Present value $???


b.

If the inflation rate over the next few years is expected to be 3.9%, what will the real value of the $100 payoff be in terms of today?s dollars??(Do not round intermediate calculations. Round your answer to 2 decimal places.)


??Real value $???


c.

What is the real interest rate??(Do not round intermediate calculations. Round your answer to 3 decimal places.)


??Real interest rate ?% ?


d.

Show that the real payoff from the bond [from part (b)]?discounted?at the real interest rate [from part (c)] gives the same present value for the bond as you found in part (a).?(Do not round intermediate calculations. Round your answer to 2 decimal places.)


??Present value $???


 

Paper#9256593 | Written in 27-Jul-2016

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