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Unformatted text preview: . 08) 3 = 1 , 533 6. a. Nominal interest rate is the rate at which money invested grows. Nominal rates, adjusted for inﬂation in a period, are real interest rate. b. Real interest rate is the rate of which the purchasing power of an investment increases. c. A cash ﬂow expressed in nominal terms if the actual dollars to be received or paid out are given; A cash ﬂow is expressed in real terms if the current, or date 0, purchasing power of the cash ﬂow is given. 7. a.APR=1.25%*12=15% b.Annually compounded rate= (1 + 1 . 25%) 121 = 16 . 08% 2...
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 Spring '08
 Chen,J
 Economics, Inflation, Interest Rates, Future Value, Nominal Interest Rate, Mathematical finance

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