The real cash flow occurring in year 2 is $60,000.If the inflation rate is 5% per year and the real rate of interest is 2% per year,calculate the nominal cash flow for year 2.
A)$60,000
B)$62,424
C)$66,150
D)$63,654

Question

Quizplus · Accepted Answer

The nominal cash flow is calculated by adjusting the real cash flow for inflation. The formula is: Nominal Cash Flow = Real Cash Flow * (1 + Inflation Rate)^n. For year 2, it is $60,000 * (1 + 0.05)^2 = $66,150.

The Real Cash Flow Occurring in Year 2 Is $60,000