Ned help

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    pastorgold
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    • Topics: 8
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    Hey members,
    I will be very grateful if some one could help explain to me the meaning of using nominal term approach in the calculation of npv of an investment..Ref:Dec 2009 question 1b.
    please help.
    Thanks to all.
    pastorgold


    Avatar of acca13
    acca13
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    • Topics: 48
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    Hi there,

    recall fishers formula:

    there are two rates: real rate, one which does not include the effet of inflation
    and the other one is money/nominal rate: one that does include inflation

    So nominal cashflows are cashflows that are discounted at a nominal discount rate..

    I hope I’ve cleared your doubt..

    be good.

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