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May 26, 2015

Homework Help: Math

Posted by Katie on Wednesday, May 11, 2011 at 3:13pm.

The nominal rate of interest is 8% and the rate of inflation is 5%. A single deposit is invested for 10 years. Let:

A= value of the investment at the end of 10 years measured in "constant dollars," i.e. in dollars valued at time 0.
B= value of the investment at the end of 10 years computed at the real rate of interest.

Find the ratio A/B.

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