Business, 08.04.2021 23:10, alleyboard

You are trying to estimate the real interest rate for the mining industry products and proceed as follows. You consider buying coal and gold in equal proportion, spending $1000 on coal, and another $1000 on gold in today's dollars. In 6 years from now, the selling values in actual dollars are predicted to be $1,258 (coal) and $1,279 (gold). Inflation (for coal) is 1.5% per year, for the next 6 years. For gold, the gold price index is predicted to rise in the next 6 years from the current 417 points to 431 points. Compute the estimated real interest rate, as a number, with 0.001 precision. Hint: Calculate real interest rate for the cash flow: 1) invest now $1000+$1000; 2) sell in 6 years coal and gold and obtain appropriate cash flow.

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You are trying to estimate the real interest rate for the mining industry products and proceed as fo...