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You will receive $100 from a savings bond in 3 years. The nominal interest rate is 8.3%.
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 3.3%, 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.)
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