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What happens to the future value of money when the inflation rate exceeds the interest rate?
Wiki User
∙ 13y ago
it increases
Wiki User
∙ 13y ago
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Suppose that inflation is -3 per year and it is expected to continue at that rate in the future If the nominal interest rate is 0 per year then what is the real interest rate?
-3
If the inflation premium for a bond goes up the price of the bond?
The price of the bond decreases; the inflation premium would increase the market interest rate, which in bond valuation is located in the denominator, and the coupon payment rate is located in the numerator. When calculating the NPV of future coupon payments, as the denominator or market interest rate + inflation premium increases, the Net Present Value of future coupon payments decreases and the overall value of the bond decreases as well. The price of the bond decreases; the inflation premium would increase the market interest rate, which in bond valuation is located in the denominator, and the coupon payment rate is located in the numerator. When calculating the NPV of future coupon payments, as the denominator or market interest rate + inflation premium increases, the Net Present Value of future coupon payments decreases and the overall value of the bond decreases as well.
What type of yield curve predicts a future increase in inflation?
A inverted slope yield curve pridecits future increase in inflation.
What happens when federal reserve raises interest rates?
If the Federal Reserve Bank of New York plans on raising interest rates at some point in the near future it will change the "fed funds" rate on overnight bank loans.
3 A dollar today is worth more than a dollar to be received in the future because?
there are two reasons. 1. A dollar today can earn interest so you will have more than a dollar in the future. 2. Inflation will reduce the purchasing power a dollar over time, so it's better to get the dollar today and spend it today because it won't buy as much stuff tomorrow.
What happens to the future value of money when the inflation exceeds the interest rate?
it will increase
Do future value calculators account for inflation?
No. Future Value Calculators use a set amount, payment and interest fee to calculate. If you need to apply the inflation factor, you will need to use an Inflation Calculator.
Suppose that inflation is -3 per year and it is expected to continue at that rate in the future If the nominal interest rate is 0 per year then what is the real interest rate?
-3
If the inflation premium for a bond goes up the price of the bond?
The price of the bond decreases; the inflation premium would increase the market interest rate, which in bond valuation is located in the denominator, and the coupon payment rate is located in the numerator. When calculating the NPV of future coupon payments, as the denominator or market interest rate + inflation premium increases, the Net Present Value of future coupon payments decreases and the overall value of the bond decreases as well. The price of the bond decreases; the inflation premium would increase the market interest rate, which in bond valuation is located in the denominator, and the coupon payment rate is located in the numerator. When calculating the NPV of future coupon payments, as the denominator or market interest rate + inflation premium increases, the Net Present Value of future coupon payments decreases and the overall value of the bond decreases as well.
More than one net present value?
The present value depends on assumptions made about interest or inflation rates for the future.
What is the future value of 100000 dollars with 2 per cent interest in 15 years?
At 2% compound interest, it will be 134,586.83 dollars - at today's prices. What inflation will do its real value is anyone's guess.
What is interse agreement?
An interest rate agreement is a transaction contract between two parties in which one party guarantees a payment to another if the future rate of interest exceeds the market rate specified in the agreement at a future date. The second party pays the first a premium for the guarantee.
What type of yield curve predicts a future increase in inflation?
A inverted slope yield curve pridecits future increase in inflation.
What happens when federal reserve raises interest rates?
If the Federal Reserve Bank of New York plans on raising interest rates at some point in the near future it will change the "fed funds" rate on overnight bank loans.
What happens to the present value of an annuity when the interest rate raises?
decreases towards the future value faster
3.How do inflation and taxes in the Philippines affect earnings on savings?
Economists often refer to inflation as the "hidden tax" on consumers. Why is inflation the hidden tax? Inflation causes saved money to have less value over time. Money that is earned today has greater purchasing power than it will in the future once the force of inflation has caused goods and services to have higher prices. Money must be interested in interest earning investments if one wishes to curb inflation to some degree.
3 A dollar today is worth more than a dollar to be received in the future because?
there are two reasons. 1. A dollar today can earn interest so you will have more than a dollar in the future. 2. Inflation will reduce the purchasing power a dollar over time, so it's better to get the dollar today and spend it today because it won't buy as much stuff tomorrow.
