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Your rich aunt is going to give you an end of year gift of $1,100 for each for the next 10 years. (a) If general price inflations is expected to average 7% per year during the next 10 years, what is the equivalent value of these gifts at the present time? The real interest rate in 4% per Year. (b) Suppose that your aunt specified that the amount gifts of $1,100 are to be increased by 7% each year to keep pace with inflation. With a rea interest rate of 4% per year, what is the current PW of the gifts?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91788315

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