L M N Before we can use a financial calculator, we must first find the expected real, or inflation-adjusted, rate of return. The real rate is calculated as follows: Real rate= (1 + roV(1 + Inflation) - 1.0 6.00% 2.00% Inflation (1 + Inflation) Real rate Real rate Real rate (1 + r ) 1.06 ? - 1.0 - 1.0 1.02 Step 2: Need to calculate the purchasing power of $100,000 in 10 years, Le., calculate PV. FV Inflation rate N py $100,000 2.00% (582,034 83) Step 3: 3 Calculate the size of the required initial payment 4 BEGIN 5 N 61 7 PV B FV $82,034.83 9 PMT NVALUE! A deposit of $6,598.87 made today and growing by 2% per year will accumulate to $100,000 by Year 10 31 the interest rate is 6% 53 Use Amortization Schedule and Excel's Goal Seek Function Goal Seek Set cet: S$155 Year Interest Beginning Deposit Made Earned Balance at Ber Of Year During Year $0.00 $6,59887 $395.93 6,994.80 6,730 85 $823.54 14.549.19 6,865 46 $1.284.88 22,699.53 7 ,002.77 $1,782.14 31 484 44 7 149 R $2317 4 5-15 Annual Monthly Compound To yale! By changing cel: $0$156 OK Cancel 56 157 158 159 160 Ending Balance $6,994.80 $14,549.19 $22.699.53 $31.484.44 4 4 5-16 EFF | 5-17 Days in a Year Web App 5A 5-14 IRR Web 5-18 Amortization V PRUDLEM Suppose you need to accumulate $100,000 in 10 years. You plan to make a deposit now, at Time 0, and then to make 9 more deposits at the beginning of the following 9 years, for a total of 10 deposits. The bank pays 6% interest, and you expect to increase your initial deposit amount by the 2% inflation rate 121 each year