Stephen Wants to Make an Investment That Will Have a Real

question 105

Short Answer

Stephen wants to make an investment that will have a real growth rate of 15%. If the current inflation rate is 5.4%, what annual interest rate will he need to get on his investment to accomplish his goal?

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Definitions:

Indirect Method

A method of calculating cash flows from operating activities in the cash flow statement by adjusting net income for changes in non-cash accounts.

Investing Activities

Transactions involving the purchase and sale of long-term assets and other investments not considered cash equivalents.

Cash Flow

The total amount of money being transferred in and out of a business, especially affecting liquidity.