You Plan on Depositing $10,000 a Year in Real Terms

question 274

Multiple Choice

You plan on depositing $10,000 a year in real terms into your investment account for the next four years. The relevant nominal discount rate is 7.5% and the inflation rate is 4.2%. What are these deposits worth in today's dollars?

• A) $36,418.02
• B) $36,787.78
• C) $37,023.03
• D) $38,021.21
• E) $38,504.19

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Definitions:

Post World War II

The period after the end of World War II, generally considered to have started in 1945, marked by significant social, political, and economic changes globally.

Stagflation

A condition of slow economic growth and relatively high unemployment accompanied by rising prices, or inflation.

Real GDP

Gross Domestic Product adjusted for inflation, representing the value of all goods and services produced over a specific time period in real terms.

Inflation Rates

The percentage rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.