Question:

You are planning to invest $2,500 today for three years at a nominal interest rate of 9 percent with annual compounding.

a. What would be the future value of your investment?

Answer:

b. Now assume that inflation is expected to be 3 percent per year over the same three-year period. What would be the investments future value in terms of purchasing power?

Answer:

c. What would be the investments future value in terms of purchasing power if inflation occurs at a 9 percent annual rate?

Answer:

Submission Requirements: Answer each problem in detail with a conclusion and results. Submit your answer in a Microsoft Excel file, showing step-by-step solutions to all calculations.