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2. (4 points) A business owner would like to save $250,000 (in today's dollars) to construct a new addition to its office building in 15
2. (4 points) A business owner would like to save $250,000 (in today's dollars) to construct a new addition to its office building in 15 years. The inflation rate is expected to be 6% per year over the 15 year period. The business owner will place money into an investment account now (time 0) in order to pay for the addition. The investment account will earn 10% interest per year. a. Determine the combined interest rate, ic. b. How much money should be set aside now (time 0) in an investment account in order to have $250,000 15 years from now to pay for the addition? 2. (4 points) A business owner would like to save $250,000 (in today's dollars) to construct a new addition to its office building in 15 years. The inflation rate is expected to be 6% per year over the 15 year period. The business owner will place money into an investment account now (time 0) in order to pay for the addition. The investment account will earn 10% interest per year. a. Determine the combined interest rate, ic. b. How much money should be set aside now (time 0) in an investment account in order to have $250,000 15 years from now to pay for the addition
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