question on rates that I need help with

Business & Finance
Tutor: None Selected Time limit: 1 Day

Assume that the inflation rate during the last year was 1.36 percent. US government T-bills had the nominal rates of return of 4.91 percent. What is the real rate of return for a T-bill?

Sep 1st, 2015

Thank you for the opportunity to help you with your question!

There's a simple equation relating the inflation rate, nominal rate, and real rate:

nominal rate = real  rate - inflation rate

real rate = nominal rate - inflation rate

real rate = 4.91 - 1.36

real rate = 3.55%

The equation is set up this way because real rate takes into account inflation, whereas nominal rate does not.


Please let me know if you need any clarification. I'm always happy to answer your questions.
Sep 1st, 2015

Could you help me with this question:

You have decided to place $853 in equal deposits every month at the beginning of the month into a savings account earning 14.46 percent per year, compounded monthly for the next 14 years. The first deposit is made today. How much money will be in the account at the end of that time period?

Sep 1st, 2015

Yup, I'll get get back to you shortly!

Sep 1st, 2015

Thank you

Sep 1st, 2015

i_regular_deposit_p.png

Sep 1st, 2015

P=principal after n years
M=deposit amount per period
i=interest rate
q=number of periods in a year
n=number of years

Sep 1st, 2015

I'm not 100% sure, but I think this is the equation you use.  You're solving for P, and you're given all the other values:

M=853

i=0.1446

q=12

n=14

And then you just plug those numbers in and simplify.  Have you seen that equation either in class notes or in your textbook?

Sep 1st, 2015

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Sep 1st, 2015
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Sep 1st, 2015
Dec 6th, 2016
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