Mr. Art Deco will be paid $260,000 one year hence. This is a nominal flow, which...

90.2K

Verified Solution

Question

Finance

Mr. Art Deco will be paid $260,000 one year hence. This is anominal flow, which he discounts at a nominal discount rate of 9%.PV = $260,000 / (1 + .09) = $238,532 The inflation rate is 4%.Calculate the PV of Mr. Deco’s payment using the equivalent realcash flow and real discount rate. (You should get exactly the sameanswer as he did.) (Do not round intermediate calculations. Roundyour "Real cash flow" and "Present value" answers to the nearestwhole dollar amount. Enter the "Real discount rate" as a percentrounded to 3 decimal places.)
Real cash flow ?$
Real discount rate ?%
Present value? $

Answer & Explanation Solved by verified expert

4.2 Ratings (576 Votes)

See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

Mr. Art Deco will be paid $260,000 one year hence. This is anominal flow, which he discounts at a nominal discount rate of 9%.PV = $260,000 / (1 + .09) = $238,532 The inflation rate is 4%.Calculate the PV of Mr. Deco’s payment using the equivalent realcash flow and real discount rate. (You should get exactly the sameanswer as he did.) (Do not round intermediate calculations. Roundyour "Real cash flow" and "Present value" answers to the nearestwhole dollar amount. Enter the "Real discount rate" as a percentrounded to 3 decimal places.)Real cash flow ?$Real discount rate ?%Present value? $