a. If the market interest rate is 8% and the current inflation-free interest rate is 4.85%,
what is the inflation rate? [3 points]
b. The Transocean Inc. plans to make a five-year period payment to offset its one bad
debt in an account. The payments begin with a $3,000 payment at the end of the
first year. The payments then increase at the rate of 2% per year. Assume that the
average general inflation rate is 8%, and the market interest rate is 4% during this
five-year period.
Calculate the inflation free interest rate. [3 points]
What is the equivalent present worth of the automobile? [4 points]

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