Inflation and Real Interest Rates — Engineering Board Exam Practice Questions

5 free engineering board exam reviewer questions on Inflation and Real Interest Rates (Engineering Economics), each with the correct answer and a worked solution.

1. A retiree has P2,000,000 earning 8% per year while inflation is 4%. The retiree wants year-end withdrawals for 10 years that rise with…
2. A project yields P500,000 per year in today's (constant) pesos for 10 years, so the actual receipts rise with 5% annual inflation. The…
3. An item costs P100,000 today. If inflation is 6% per year, how much will an equivalent item cost in 5 years?
4. A bank pays 12% per year while inflation is 5% per year. Find the real interest rate.
5. The real (inflation-free) interest rate is 6% and inflation is 4% per year. Find the market (combined) interest rate.