The value of an investment of $1000 earning 7% compounded annually is V(I, R) = 1000 1 + 0.07(1 − R) 1 + I 10 where I is the annual rate of inflation and R is the tax rate for the person making the investment. Calculate VI(0.03, 0.28) and VR(0.03, 0.28). (Round your answers to two decimal places.) VI(0.03, 0.28) = VR(0.03, 0.28) =

Respuesta :

Answer:

[tex]V_{I}=-11812.39[/tex]

[tex]V_{R}=-810.81[/tex]

Explanation:

We will first state the equation.

[tex]V(I,R)=1000[\frac{1+0.07(1-R)}{1+I}]^{10}[/tex]

Where:

I = annual rate of inflation;

R = the tax rate for the person making the investment.

We first determine the partial derivatives with respect to I and R.

[tex]\frac{dV}{dI}=-10000\frac{(1+0.07(1-R))^{10}}{(1+I)^{11}}[/tex]

[tex]\frac{dV}{dR}=-700\frac{(1+0.07(1-R))^{9}}{(1+I)^{10}}[/tex]

VI(0.03, 0.28)

[tex]\frac{dV(0.03,0.28}{dI}=-10000\frac{(1+0.07(1-0.28))^{10}}{(1+0.03)^{11}}[/tex]

=-11812.39

[tex]\frac{dV(0.03,0.28)}{dR}=-700\frac{(1+0.07(1-0.28))^{9}}{(1+0.03)^{10}}[/tex]

=-810.81