Sally has invested $10,000 now and wants to earn a real interest rate of 10% per year. Assume that the inflation rate is 7% per year. Determine the future worth Sally has to receive 10 years from now? a) $62, 338 b) Unknown c) $42, 338 d) $52, 338

Results are below.

Explanation:

Giving the following information:

Inflation rate= 7%

Real rate of return= 10%

Present value (PV)= $10,000

Number of periods (n)= 10 years

The real rate of return incorporates the effect of the inflation rate. Therefore, the nominal rate of return:

Nominal rate of return= 0.1 + 0.07= 17%

To calculate the Future Value, we need to use the following formula:

FV= PV*(1 + i)^n

FV= 10,000*(1.17^10)

FV= $48,068.28

This is the nominal value received after ten years.

If Sally wants to determine the real value of the investment after 10 years, we must use the real rate of return:

FV= 10,000*(1.1^10)

FV=$25,937.42

both are integral parts of a corporate balance sheet. the cash flow statement, or statement of cash flows, measures the sources of a company's cash and its uses of cash over a specific time period. the income statement measures a company's financial performance, such as revenues, expenses, profits or losses over a specific time period (in fact, it's sometimes called a statement of financial performance).

a cash flow statement shows exactly how much money a company has received and how much it has spent, traditionally over a period of one month. it captures the current operating results and changes on the balance sheet, such as increases or decreases in accounts receivable or accounts payable, and does not include noncash accounting items such as depreciation and amortization. the cash flow generally comes from revenue received as a result of business activity, but it may be augmented by funds available as a result of credit. a cash flow statement is used to determine the short-term viability and liquidity of a company, specifically how well it is positioned to pay its bills and vendors.

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