1. **State the problem:** We want to find the maximum price to pay now for a subscription that allows one medium-sized Starbucks coffee per month forever. 2. **Given data:** - Price per coffee: $2.66$ - Market interest rate (nominal): $6\%$ per annum - Inflation rate: $3\%$ per annum - Payments: one coffee per month, perpetually 3. **Adjust the interest rate for inflation to get the real interest rate:** The real interest rate $r$ is given by the formula: $$ 1 + r = \frac{1 + i}{1 + \pi} $$ where $i=0.06$ (nominal rate) and $\pi=0.03$ (inflation rate). Calculate: $$ 1 + r = \frac{1 + 0.06}{1 + 0.03} = \frac{1.06}{1.03} \approx 1.02913 $$ So, $$ r = 1.02913 - 1 = 0.02913 = 2.913\% \text{ per annum} $$ 4. **Convert the annual real interest rate to a monthly real interest rate:** Since payments are monthly, we use: $$ r_{m} = (1 + r)^{\frac{1}{12}} - 1 = (1.02913)^{\frac{1}{12}} - 1 $$ Calculate: $$ r_{m} \approx 1.00239 - 1 = 0.00239 = 0.239\% \text{ per month} $$ 5. **Calculate the present value of a perpetuity with monthly payments:** The perpetuity formula is: $$ PV = \frac{C}{r_{m}} $$ where $C=2.66$ is the monthly payment (price of one coffee). 6. **Calculate the maximum price:** $$ PV = \frac{2.66}{0.00239} \approx 1113.81 $$ **Final answer:** The maximum price you would be willing to pay for the subscription is approximately **1113.81** monetary units.