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ClassHW_6

# ClassHW_6 - Hw-6 Solutions 1(8.3 f = 4 per year How long...

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Hw-6 Solutions 1. (8.3) f = 4% per year; How long until \$1 (actual) will be worth \$0.50 (real) in today's purchasing power? From Equation 8-1, with k = 0, we have (R\$) N = \$0.50 = (\$1) (1.04) N = 2 N (ln (1.04)) = ln (2) N = 18 years In 18 years, the dollar's purchasing power will be one-half of what it is now if the general price inflation rate is 4% per year. 2. (8.9) By using Equation 8-1, but with each year's general price inflation taken into account separately , the R\$ equivalents in year 0 dollars are calculated as follows. EOY Salary (R\$ in Year 0) 1 \$34,000 (P/F,2.4%,1) = \$34,000 1 (1 + 0.024) Λি Νয় Μ৏ Ξ৯ Πਏ Ο৿ = \$33,203 2 \$36,200 (P/F,2.4%,1)(P/F,1.9%,1) = \$36,200 1 (1 + 0.024) Λি Νয় Μ৏ Ξ৯ Πਏ Ο৿ 1 (1 + 0.019) Λি Νয় Μ৏ Ξ৯ Πਏ Ο৿ = \$34,692 3 \$38,800 (P/F,2.4%,1)(P/F,1.9%,1)(P/F,3.3%,1) = \$38,800 1 (1 + 0.024) Λি Νয় Μ৏ Ξ৯ Πਏ Ο৿ 1 (1 + 0.019) Λি Νয় Μ৏ Ξ৯ Πਏ Ο৿ 1 (1 + 0.033) Λি Νয় Μ৏ Ξ৯ Πਏ Ο৿ = \$35,996 4 \$41,500 (P/F,2.4%,1)(P/F,1.9%,1)(P/F,3.3%,1)(P/F,3.4%,1) = \$41,500 1 (1 + 0.024) Λি Νয় Μ৏ Ξ৯ Πਏ Ο৿ 1 (1 + 0.019) Λি Νয় Μ৏ Ξ৯ Πਏ Ο৿ 1 (1 + 0.033) Λি Νয় Μ৏ Ξ৯ Πਏ Ο৿ 1 (1 + 0.034) Λি Νয় Μ৏ Ξ৯

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ClassHW_6 - Hw-6 Solutions 1(8.3 f = 4 per year How long...

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