Solution

There are two equivalent ways of solving for rd0. The first is to take the real growth factor, 8.0/3.04, and set it equal to (1 + rd0)N.

The result is rd0 = 5.52%. The second method is to calculate the market rate rd by setting the market growth in current dollars equal to (1 + rd)N and calculating the inflation by setting the CPI increase equal to (1 + rin)N. One finds that rd = 12.246% and rinf = 6.371%. Then Eq. 8.7 can be solved for rd0, with the result r 0. 1 2246 - 0.06371 5

the same as before. COMMENTS

Choosing a discount rate is not without pitfalls. For the present example, the comparison with the real growth of other long term investments seems appropriate; of course, there is no guarantee that the endowment will continue growing at the same real rate in the future.

Solar Stirling Engine Basics Explained

Solar Stirling Engine Basics Explained

The solar Stirling engine is progressively becoming a viable alternative to solar panels for its higher efficiency. Stirling engines might be the best way to harvest the power provided by the sun. This is an easy-to-understand explanation of how Stirling engines work, the different types, and why they are more efficient than steam engines.

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