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"You want to set up an account that will pay you $A in constant (year-0) dollars in each year from the end of year 1 through the end of year 7 (a total of 7 payments). The inflation rate is 4.37% and you wish to receive $107 in actual (year-7) dollars from the account at the end of year 7. If the market interest rate for the account is 4.7% compounded annually, how much to the nearest dollar do you need to deposit now to meet your wishes? You will not make any other deposits after the initial deposit. (HINT : you will need to calculate the inflation-free interest rate to relate $A to the initial deposit.)"

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Financial Management, Finance

Category:- Financial Management
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