6.2 Complete the following table. Assume that the real interest rate is 3% per year, and inflation is expected to be constant at 2% per year. Recall that nominal cash flows must be discounted using nominal rates, and real cash flows must be discounted using real rates. (7 marks)

Year	Nominal cash flow	Real cash flow
0	100,000	100,000
1	+ 12,000
2	+22,000
3	+15,000
4	+10,000
Net present value
Discount rate		3%

Note that present values are taken at time 0, at which point real cash flows and nominal cash flows are the same, because there is no time for inflation to affect the cash flows.

This implies that the present values of the two series of cash flows should be exactly the same.