Treasury securities that mature in 6 years currently have an interest rate of 8.5%. Inflation is expected to be 5% each of the next three years and 6% each year after the third year. The maturity risk premium is estimated to be 0.1% (t-1), where t is equal to the maturity of the bond (i.e. the maturity risk premium of a one year bond if zero). The real risk free rate is assumed to be constant over time. What is the real risk free rate of interest?

## Question on project evaluationABC company purchased a machine 5 years ago at cost of $100000. The machine had an expected life of 10 years at the time of purchase, and an expected salvage value of $10,000 at the end of the 10 years. Show all workings to justify your answer |

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