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31 August, 04:05

You're considering an investment that you expect will produce a return of 10 percent next year, and you expect that your real rate of return on this investment will be 7 percent. What do you expect inflation to be next year? The expected inflation rate next year will be

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Answers (2)
  1. 31 August, 04:08
    0
    Answer: The expected inflation rate next year will be:v 2,80%

    Explanation: The formula used is: Inflation Rate = ((1 + Nominal Rate of Interest) / (1 + Real Rate of Interest)) - 1

    So:

    Inflation rate = ((1 + 0,1) / (1 + 0,07)) - 1 = 0,02803 x 100 = 2,80%.
  2. 31 August, 04:33
    0
    Inflation = 3%

    Explanation:

    Giving the following information:

    You're considering an investment that you expect will produce a return of 10 percent next year, and you expect that your real rate of return on this investment will be 7.

    Inflation = interest rate - real interest rate

    Inflation = 10 - 7 = 3%
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