a) An investment Y is gaining interest at the inflation adjusted annual interest rate X

Finance Dec 22, 2020

a) An investment Y is gaining interest at the inflation adjusted annual interest rate X. 10% of the account goes to charity at the end of each year starting at year 1. The average annual inflation rate is F. Write the formula for the real future worth in terms of X, Y, and F after n years.

Expert Solution

Real future worth / Real Interest rate / Inflation adjusted return= (1+ Return/1 + Inflation Rate)-1

Thus,

X= (1+ Yn/1 + F)-1.

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