Nominal-real values

Suppose you own an apartment and are considering renting it out. You agree to charging an annual rent of $24,000. The tenant wants a 10-year lease starting in 2020 and ending in 2029. You expect CPI inflation to be 3% per year between 2021 and 2025 (for 5 years) and 5% every year after that (for 4 years), as shown in the Table below. X P X/P Year Rent nominal Inflation CPI Rent real 2020 24,000.00 NA 1 24,000.00 2021 24,720.00 0.03 1.0300 24,000.00 2022 0.03 24,000.00 2023 0.03 24,000.00 2024 0.03 24,000.00 2025 0.03 24,000.00 2026 0.05 24,000.00 2027 0.05 24,000.00 2028 0.05 24,000.00 2029 0.05 24,000.00 Use the table above to fill up the CPI and annual rent (nominal) you will charge every year during the length of the lease to maintain the real value of the rent. Then answer the questions below. Round to the nearest dollar. Note: Let Xt be the rent in year t. Let Pt be the price level (e.g. CPI) in year t with a base level of 1, not 100. Then Xt/Pt is the real value of the r..5@qmail.cuny.edu Switch account

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The (expected) price level in year 2022 will be *

2.44

1.03

1.06

1.16

This is a required question

The (expected) price level in year 2025 will be *

2.44

1.03

1.16

1.06

The (expected) price level in year 2029 will be *

1.41

1.06

1.03

2.44

The nominal rent in year 2022 will be *

$27,822

$24,000

$31,234

$25,461

The nominal rent in year 2025 will be *

$24,000

$25,461

$27,822

$32,234

The nominal rent in year 2029 will be *

$27,822

$32,234

$33,818

$24,000

The real rent in year 2029 will be *

$33,818

$27,822

$44,557

$24,000