Find out the constant nominal interest rate, Financial Accounting

Assignment Help:

You decide to invest 1000 in a 5-year Treasury Inflation protected bond that each year offers a return of -1.5% plus the rate of inflation. You assume 1-year inflation rates over the next five years of (1.5%, 2%, 2.5%, 2.75%, 3%). This means that the rate of return in the first year is zero.

a. What is the total value of your investment in five years?

b. What is the constant nominal interest rate that would lead to the same value in five years?

c. How would your answers to a. and b. change if inflation is higher than you expected?

 


Related Discussions:- Find out the constant nominal interest rate

TRADE AND PROFIT AND LOSS ACCOUNT, The following figures are taking from th...

The following figures are taking from the book of Sheen Compnay limited as on december 31,2009 DEBIT SIDE : opening stock Rs 75000 purchases 245000 wages 30000 c

Explain statement of financial condition, Q. Explain Statement of Financial...

Q. Explain Statement of Financial Condition? Statement of Financial Condition -Elementary FINANCIAL STATEMENT, generally accompanied by appropriate DISCLOSURES which describe t

Revenue Recognition, What are some critics by individuals and professional ...

What are some critics by individuals and professional bodies in this joint project?

Protected transactions, Protected transactions These fall into three ca...

Protected transactions These fall into three categories: (A) Under Section 50: Payments by the bankrupt to creditors; Payments or deliveries to the bankrupt; C

Determine the budgeted profit for period, Questikon: For Period Wilson ...

Questikon: For Period Wilson Ltd has produced the following budget figures for Product X: For the period, the budgeted fixed overhead is Rs100,000 and the budgeted sales ar

Hedge and a cash flow hedge, PC Bank has $100,000 in fixed rate loans payin...

PC Bank has $100,000 in fixed rate loans paying an annual interest rate of 10 percent, payable semiannually. PC Bank also has $100,000 in certificates of deposit. Their depositor

Pro-forma accounts under trustee act-trusts laws and account, Pro-forma acc...

Pro-forma accounts under Trustee Act v\:* {behavior:url(#default#VML);} o\:* {behavior:url(#default#VML);} w\:* {behavior:url(#default#VML);} .shape {behavior:url(#def

Personal representatives duties-executorship law, Personal representatives ...

Personal representatives duties Personal representation has the following duties; 1) To provide and pay out of the estate of the deceased, the expenses of a reasonable funeral

Write Your Message!

Captcha
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