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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
| 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: |
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