1. An investor desires to earn a real interest rate of return of 6%. If the expected rate of inflation is 5%, whatnominal rate of interest would the investor set on a loan if all risk premiums are zero?
a. 1%
b. 5%
c. 6%
d.11%
e. 13%
2. An asset that has a book of $5,500 could be sold for $10,000 at the end of the project life. At the beginning of the project the company invested $3,500 in net working capital. The tax rate is 40%. The net salvage value is:
$8,000
$2,700
$6,200
$11,700