Solve for the Indicated Variable $$P = \frac { A } { ( 1 + r ) ^ { 2 } } , \text { for } r$$

question 203

Multiple Choice

Solve for the indicated variable. Assume the variable you are solving for must be greater than 0.
- $$P = \frac { A } { ( 1 + r ) ^ { 2 } } , \text { for } r$$

• A) \[r = \frac { P + \sqrt { P ^ { 2 } + A P } } { 2 }\]
• B) \[r = \frac { - P + \sqrt { P ^ { 2 } - A P } } { P }\]
• C) \[r = \frac { - \mathrm { P } + \sqrt { \mathrm { AP } } } { \mathrm { P } }\]
• D) \[r = \frac { P + \sqrt { \mathrm { AP } } } { 2 \mathrm { P } }\]

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Definitions:

Net Capital Outflow

The difference between the purchase of foreign assets by domestic residents and the purchase of domestic assets by foreign residents over a specific period.

Purchasing-Power Parity

An economic theory that compares different countries' currencies through a "basket of goods" approach, arguing that exchange rates should equalize the price of the basket of goods in each country.

Price Level

An index that measures the average of current prices across a variety of goods and services compared to a base year.

Nominal Value

The face value of a financial instrument without adjusting for inflation or other factors.