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If the expected real interest rate of 5% and expected inflation rate of 3%, then the nominal interest rate in year t is approximately
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- Assume the nominal rate of return is 8.63% and the real rate is 4.68%. Find the inflation rate of return using the exact formula.Suppose Cho is a cinephile and buys only movie tickets. Cho deposits $3,000 in a bank account that pays an annual nominal interest rate of 10%. Assume this interest rate is fixed—that is, it won't change over time. At the time of her deposit, a movie ticket is priced at $15.00. Initially, the purchasing power of Cho's $3,000 deposit is 200 movie tickets. When the rate of inflation is equal to the interest rate on Cho's deposit, the purchasing power of her deposit __________over the course of the year. Select one of the following: A. Rises B. Remains the Same C. FallsA man deposited his first paycheck of $2000 into a long-term savings account at a bank at an interest rate of 12% in 1951 as a gift to his future grandchild. Assume a steady inflation rate of 8%. If his grandchild withdraws that money today in 2021, how much actual money did they withdraw? How much purchasing power would this withdrawal have in 1951?
- If the interest rate on a one-year loan is 5%5% and the expected inflation rate is −2%−2% for the same period, what is the expected real interest rate on the loan?The real interest rate is 5% per quarter and the inflation rate is 2% per quarter. Calculate the inflation-adjusted interest rate per quarter.Find the inflation rate in the economy if the real interest rate is 4% and Nominal Interest rate is 10%
- If the nominal rate of interest is 13.02% and the real rate of interest is 8.31%, what is the expected rate of inflation?Assuming that the inflation rate from 2018 through 2020 is 6% per year: a) What would be the real value of a $55,000 income in each of the three years? b) What does the real income computed for 2019 mean?The average inflation rate is calculated on the basis of the CPI for all the items in the market basket. True or false?
- A country is experiencing an inflation rate of exactly 100 percent per month for 4 months. At the end of 4 months, the price level has increased _____ times in relationship to the initial period.Suppose a house that was worth $68,000 in 1987 is worth $104,000 in 2004. Assuming a constant rate of inflation from 1987 to 2004, what is the inflation rate?Suppose Rosa is a cinephile and buys only movie tickets. Rosa deposits $3,000 in a bank account that pays an annual nominal interest rate of 5%. Assume this interest rate is fixed-that is, it won't change over time. At the time of her deposit, a movie ticket is priced at $10.00. Initially, the purchasing power of Rosa's $3,000 deposit is movie tickets. For each of the annual Inflation rates given in the following table, first determine the new price of a movie ticket, assuming it rises at the rate of inflation. Then enter the corresponding purchasing power of Rosa's deposit after one year in the first row of the table for each inflation rate. Finally, enter the value for the real interest rate at each of the given inflation rates. Hint: Round your answers in the first row down to the nearest movie ticket. For example, if you find that the deposit will cover 20.7 movie tickets, you would round the purchasing power down to 20 movie tickets under the assumption that Rosa will not buy…