Real interest rate ≈ nominal interest rate − inflation rate

This implies that nominal rate of return = real interest rate + inflation rate
For the assets
The nominal rate of return (stock) = 1+ (2240.779-2240.088/2240.779)*100=1.03
The nominal rate of return (bonds) = 1+ (10048.52-9074/10048.52)*100=10.69
The nominal rate of return (cash) = 1+ (3769.44-3315.59/3769.44)*100 =13.04
The nominal rate of return (bills) = 1+ (234.812-233.049/234.812)*100= 1.75
Nominal rate of return 1 + r = 1 + r/1 + π
Taking the case of the nominal return to bills, it is possible to show that 1+r= 1 + r/1 + π
From the calculation r+1= 1 + r/1 + π,
it is possible to solve for the nominal rate of return as
(1+r)(1+ π)= 1+r
1+ π+r+ πr=1+i
Thus i= π+r+ πr
However, based on the assumption that r and π are fairly small, it follows then that
i= π+r
this indicates that the nominal rate of return is related to the
Implying that the real rate of return r is related to the nominal rate.
4.
According to Chou, Chou, & Ko, (2009), there are numerous advantages related to cash.
a. Cash is easily transferable – Money can easily be transferred from one person to the other. This is unlike other assets that may require documentation.
a. Can be measured – The value of money can be measured using market forces and other determinants. On the other hand, other asset’s values are measured using money.
b. Convenience – Money can easily be carried in pockets, or any other means, unlike other assets that may be heavy and not easily movable.
c. Cash is universal – Money can be accepted and used for trade anywhere in the world. This is unlike other assets whereby one would require a buyer who needs a similar asset to trade.
d. Convertibility – Cash can be easily converted to any asset or any other form of exchange, unlike other assets.
However, cash has the following disadvantages too:
a) Value volatility – The value of cash is highly volatile thus making it less stable than other assets.
b) Fraud – Cash can easily be used for fraudulent activities due to its ease of exchange.
c) Easy to forge – Cash can be forged and fake replicas made. This can be hard to differentiate, unlike other assets (Wachter, 2013)

References
Chou, P. H., Chou, R. K., & Ko, K. C. (2009). Prospect theory and the risk-return paradox: some recent evidence. Review of Quantitative Finance and Accounting, 33(3), 193-208.
Wachter, J. A. (2013). Can Time‐Varying Risk of Rare Disasters Explain Aggregate Stock Market Volatility?. The Journal of Finance, 68(3), 987-1035.

TO GET YOUR ASSIGNMENTS DONE AT A CHEAPER PRICE,PLACE YOUR ORDER WITH US NOW