1)- if effective rate of interset for two years is 19% and inflation 3% during first year and 3.5% during second year.Please tell me how to calculate the real rate interest? 2)- past paper April 2006 ,Q.no-8 IN this question " A dividend of 25p per share has just been paid. Dividends are expected to grow by 2% next year and by 4% the following year.Thereafter, dividends are expected to grow at 6% per annum compound in perpetuity ". according to question, .25p is paid at time t=0 .25*1.02 At t=1 . .25*1.02*1.04 at t=2 .25*1.02*1.04*1.06 at t=3 .25*1.02*1.04*1.06^2 at t=4 and so on I am right or not. if right ,Please tell me, In the solution ,Why does not include first payment in the equation? i.e according to this,the eqation will be 100*.25(1+1.02v+1.02*1.04*v^2+............) but in the solution equation is 100*.25(1.02v+1.02*1.04*v^2+...........)
