If an investment of P24,500 twenty-four years ago is now worth P55,000, at what rate, compounded semi-annually, did it earn? What is the nominal rate, effective rate and real interest rate if inflation is 4.6% (base rate: nominal interest rate)?

Guest Dec 5, 2021

#1**+1 **

Not sure I understand the question...but here is a try

Inflation DE-values the investment by 4.6 % per year : i = -.046

Find the investment rate that results in 55000 in 24 years if i = x/ 2 compounded semi

55000 = 24500 ( 1 + x/2)^{48} ( 1 - .046)^{24 }

^{ }

x = 8.244% nominal interest rate ( the interst rate if inflation is taken into account)

3.34 real interst rate effective rate = 3.43 % (these are the values if there is no inflation)

Guest Dec 5, 2021