Question
Suppose that: Sam has decided to live and work in Vancouver Sam's nominal MARR is 2.45% per year, or about 0.202% per month (this conversion
Suppose that:
- Sam has decided to live and work in Vancouver
- Sam'snominalMARR is 2.45% per year, or about 0.202% per month (this conversion is done for you in the companion spreadsheet).
- Yearly inflation is the rate which you calculated[1] in part 3.a.i (the companion spreadsheet will automatically calculate the monthly equivalent rate of inflation for you).
- Month 0 is the base month for inflation calculations, AND the 'present' for present value calculations.
- Sam's monthly rent is constant in real terms, at the baseline level from Project 1. (If your baseline rent for Vancouver was $2,000 a month, then Sam's rent is constant in real terms at $2,000 real dollars per month.)
- Sam pays rent for 40 years (480 months). The first rent payment is in month 36.
i. Calculate the present value of Sam's rent usingnominalcash flows andnominalrates. Show your work. (You're being graded onhowyou obtained the present value, not on the final numerical answer per se.)
Present Value of Rent: $
ii. Calculate the present value of Sam's rent usingrealcash flows andrealrates. Show your work. (You're being graded onhowyou obtained the present value, not on the final numerical answer per se.)
(Hint: Since Month 0 is both the present AND the base month for inflation calculations, your numerical results should be identical for parts i. and ii. If they're not, that's a sign that you should re-check your setup and calculations.)
Present Value of Rent: $
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