Description
Pure interest rate is 2%~Inflation expectations for yr 1=3%, yr 2=4%, yrs 3-5=5%~Default risk is .1% for yr 1
Explanation & Answer
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Using net present value calculators, the financial planner will suggest a
combination of asset earmarking and regular savings to be invested in a
variety of investments. In order to overcome the rate of inflation, the
investment portfolio has to get a higher rate of return, which
typically will subject the portfolio to a number of risks.
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