Review of chap 8 and 9

Review of chap 8 and 9 - Chap 8 and 9 review Chapter 8 What...

Info icon This preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon
Chap 8 and 9 review
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Chapter 8 What is inflation? Change in price without any change in quality or quantity Can use CPI/PPI to measure inflation Some definitions A$: Dollars associated with a cash flow as of the time it occurs R$: Dollars expressed in terms of same purchasing power relative to a particular time i m : Market interest rate i r :Real interest rate
Image of page 2
Some formulas Use correct interest rates! If A$, then use market rate If R$, then use real rate ( R $) k ( A $) k 1 1 f k b ( A $) k ( P / F , f %, k b ) 1 i m (1 f )(1 i r ) i r i m f 1 f
Image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
What are fixed and responsive annuities? Fixed: Annuities that do not respond to inflation Responsive: Annuities that respond to inflation Normally, quantities that we are interested in are fixed annuities Depreciation Lease payments Rent Responsive annuities will be specified by question
Image of page 4
Exchange rates, purchasing power Similar to inflation Study purchasing power between two countries
Image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 6
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern