1) Case 1. Interest rate i is 5% Expected inflation is 2% (you expect wages and prices to be 2% higher at the end of the year than they are now.) Calculate and fill in the following numbers. What you must pay bank = $1,000 *(1 +i) = $ MACHINE P Next Year =$1000 * (1 + n) =$ P SHOELACES Next Year =$1 * (1 + n) =$ SHOELACEWORKERS W Next Year =$10 * (1 + me) = $ MACHINE NextYear + (P SHOELACES Next Year SHOELACEWORKERS * 100) - (W NextYear * 4) = $ Should you make the investment? Yes or no? What is the real interest rate