Investments future value in terms of purchasing power

Assignment Help Financial Management
Reference no: EM13812357

You are planning to invest $2,500 today for three years at nominal interest rate of 9 percent with annual compounding.

a. What would be the future value of your investment?

b. Now assume that inflation is expected to be 3 percent per year over the same three- year period. What would be the investment's future value in terms of purchasing power?

c. What would be the investment's future value in terms of purchasing power if inflation occurs at a 9 percent annual rate?

Reference no: EM13812357

Questions Cloud

Explain why the reward-to-risk ratio : Given that higher risk investments, such as small-company stocks, have outperformed other investments over time, why don't all investors choose to invest only in these high risk securities? Explain why the reward-to-risk ratio must be equal for all s..
Firm decides to issue debt in order to repurchases : Consider a world where the M&M Corporate Taxes Capital Structure theory is true, then answer the following question. An all-equity firm currently has a market value of $622.09. The firm decides to issue debt in order to repurchases $126.48 in equity...
Interest-sensitive assets : The portfolio managers of a firm determined that over the next year interest-sensitive assets are in the amount of $1.5 billion while interest-sensitive liabilities are in the amount of $1.8 billion. What will happen to net interest income and relati..
Capacity to conduct a successful capital campaign : Review chapter 14 in The Complete Guide to Fundraising Management by Weinstein. Write a critical assessment of your organization's need for and capacity to conduct a successful capital campaign. Outline the key features and requirements of a capital ..
Investments future value in terms of purchasing power : You are planning to invest $2,500 today for three years at nominal interest rate of 9 percent with annual compounding. What would be the future value of your investment? Now assume that inflation is expected to be 3 percent per year over the same thr..
Chief harm-based arguments against insider trading : Explain the two chief harm-based arguments against insider trading. What does Jennifer Moore say about these arguments? Can you identify another problem with either argument?
Budget is prepare anticipating distribution of overhead cost : A company is composed of five cost centers. Each month a budget is prepared anticipating the distribution of overhead costs to the centers. Let Cw be costs incurred within the cost center, such as depreciation, supplies and indirect labor, and let Cm..
What would be the future value of your investment : You are planning to invest $2,500 today for three years at nominal interest rate of 9 percent with annual compounding. What would be the future value of your investment?
Interest rate is a simple interest rate : Find the future value of $10,000 invested now after five years if the annual interest rate is 8 percent. What would be the future value if the interest rate is a simple interest rate? What would be the future value if the interest rate is a compound ..

Reviews

Write a Review

Financial Management Questions & Answers

  What is routers optimal capital structure

What is Router’s optimal capital structure? Is the same debt ratio optimal regardless of whether the firm chooses operating Plan L or H? Does this optimal D/V ratio minimize risk as measured by either the coefficient of variation of ROE or the times ..

  Difference between periodic and perpetual inventory tracking

What is the difference between periodic and perpetual inventory tracking? Are there cases where a health care organization could use both methods of inventory costing for different types of inventory, and if so, please explain why they would do this.

  Money will be in that account at the end of that time period

For the next 12 years, you decide to place $578 in equal year-end deposits into a savings account earning 7.32 percent per year. How much money will be in that account at the end of that time period?

  Forward price and the initial value of the forward contract

A one-year long forward contract on a non-dividend-paying stock is entered into when the stock price is $40 $38 and the risk-free rate of interest is; 8% per annum with continuous compounding. What are the forward price and the initial value of the f..

  Jane stevens is 30 years old and she is reviewing her

jane stevens is 30 years old and she is reviewing her retirement plans.nbsp she currently has 20000 in a retirement

  Proposed lockbox system can eliminate

Aqua System Inc. expects to have $27,823,700 in credit sales during the coming year. Currently all checks are sent to the home office. A proposed lockbox system can eliminate 1 days of float, releasing funds which, when invested, will earn 5.08 perce..

  What is the company''s eva and what does the eva represent

Smith's Shoe Shop had $4,000,000 in operating income last year, after-tax cost of capital of 7%, and a tax rate of 35%. The company has $14,000,000 in stockholder's equity, $17,000,000 in long-term bonds, and $1,500,000 in preferred stock.

  Understanding supply chain and how the consumer can play a

understanding supply chain and how the consumer can play a critical role in the supply chain is an important part of

  What are the benefits of restructuring

What are the benefits of restructuring and please provide two real life examples. Discuss the objectives of corporate governance and why this has led to increased costs for publicly traded companies. What are the key elements of business valuations a..

  Iridium case study

Is anyone familiar with the "Iridium"/(Motorola) case study? Why did Motorola finance Iridium with project debt instead of corporate debt?

  What is each investments internal rate of return

What is each investments internal rate of return? Should the firm make any of these investments? What is each investments net present value? Should the firm make any of these investments?

  What approximate discount rate

At what approximate discount rate would $10,000 received in 5 years be worth $5,000 today? How many years would you need to receive $1,000 to be worth $10,000 today assuming a 5% discount rate? If you place $10 into a savings account and you know it ..

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