Suppose the inflation rate is 0.8% per half year and you can invest money at j₂ = 6%.If you invested $100,000 at the start of the year,how much will you have accumulated,in "real" terms (after taking into account inflation),at the end of the year? A)$104,324.14 B)$104,330.71 C)$104,412.71 D)$104,448.40

Question

Quizplus · Accepted Answer

First, let's calculate the inflation rate over the whole year:

Inflation per year = (1 + 0.008)^2 - 1 = 0.016064

So inflation for the year is 1.6064%.

Next, let's calculate the nominal return on the investment:

Nominal return = $100,000 x (1 + 0.06) = $106,000

Now, let's adjust for inflation to get the real return:

Real return = $106,000 / (1 + 0.016064) = $104,412.71

Therefore, the answer is C, $104,412.71.

Suppose the Inflation Rate Is 0