1. You purchased an investment for $1,000 on which you earned $120 investment last year. The inflation rate during that time was 3 percent. What was your real rate of return?
2. Write the equation you would use to calculate a change in an investment's NPV caused by an increase of $750 in year 4's cash flow from assets when annual interest is 10% compounded semiannually
3. You are retired and will now draw down the value of your $1.2 million equity index mutual fund portfolio at the rate of 4% ($4,000 per month) for living expenses. Equities average approximately 10% per year. Assuming the index fund does exactly the same as the index after expenses, will you do as well or worse than the market when withdrawing funds at this rate, and why?