hw3f06 - Print name Recitation Day Hour Sign name Econ 520...

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Print name___________________ Sign name _____________________ Econ 520 F06 Homework 3 10/3,10/5, due 10/6 For full credit, show your calculations on each problem. 3.1 (10 homework points) What is the present discounted value of $1000.00, payable in 8 years and not indexed for inflation , if the real interest rate is 4.00% and the nominal interest rate is 6.00%? (Assume annual compounding and give your answer to the nearest cent. Not all information is necessarily used.) 3.2 (10 homework points) If the present discounted value of $1000.00, payable in 8 years and indexed for inflation from today’s date , is $567.89, what is the real interest rate? (Assume annual compounding, and give your answer to the nearest basis point , ie to the nearest .01%) 3.3. (10 homework points) What is the present value of a perpetual income stream of $8000 per year, indexed for inflation from today’s date , if the real interest rate is 4% and the nominal interest rate is 8%? (Not all information is necessarily used.)
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This note was uploaded on 07/17/2008 for the course ECON 520 taught by Professor Ogaki during the Fall '07 term at Ohio State.

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hw3f06 - Print name Recitation Day Hour Sign name Econ 520...

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