5. Interest, inflation, and purchasing powerSuppose Amy is a cinephile and buys only movie tickets. Amy deposits $2,000 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 $20.00.Initially, the purchasing power of Amy's $2,000 deposit ismovie 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 ofinflation. Then enter the corresponding purchasing power of Amy'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 Amy will not buy seven-tenths of a movie ticket.Number of Tickets Amy Can Purchase after One YearReal Interest Rate0%Annual Inflation Rate5%10%When the rate of inflation is less than the interest rate on Amy's deposit, the purchasing power of her depositof the year.over the course

Suppose Amy only buys movie tickets. Amy deposits $2000 in a bank account that pays an annual…

Suppose Amy is a cinephile and buys only movie tickets. Amy deposits $2,000 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 $20.00. Initially, the purchasing power of Amy's $2,000 deposit is movie tickets.

Suppose Amy is a cinephile and buys only movie tickets. Amy deposits $2,000 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 $20.00. Initially, the purchasing power of Amy's $2,000 deposit is movie tickets.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

James has been working as a Mechanical Engineer ever since he graduated five years ago. Two years ago, he bought and financed a new $25,000 Jeep Compass and still owes $15,750 on his car loan. He has never been late with a car payment. James has one major credit card, with a $1,000 limit. He has had it since his senior year of college and was two months late with a payment one time during that first year. He is currently carrying a balance of $600 on this card. In the last year, James applied for six store credit cards at places that he shops a lot so that he can earn points and get discounts. He carries no balances Part 1: Calculate James’ credit score. Recalculate his credit score if he had not opened the six store credit cards. Part 2: James is tired of paying rent and would like to purchase a condo so that he can start building equity in his home. He is looking for a 30-year mortgage to purchase a $240,000 condo. What interest rate does James qualify for on a mortgage with his…
Find the value of saving when the consumption is given as $413 and the income is $511
1) Helena earns $2000 this year and will earn $1500 the next year. The interest rate between each year is 10%. She wants to consume the same quantity each year. She wants to have spent all her money by the end of year 2. Warning: each question does build on each other a) How much would she save? How much would she consume? b) If she wins the lottery during the first year, raising her earnings to $10000 this year, how much would she save, how much would she consume? c) If she now wants to consume twice as much in year 1 as she does in year 2, how much would she save, how much would she consume? d) If she now has no preferences about her consumption, but she wants to save $5000 in year 1 (to buy a new car in year 2), how much would she consume in year 1 and year2?
Suppose that the typical consumer has a salary of $30,000 in 2017. His salary grows by 2% per year. What can we say about his ability to pay for his consumption basket over time?
Sean owns a condo that he values at $500, 000. Sean hosts a dinner party, and invites Mo, a friend of a friend, who recently moved home to Halifax. Mo hates the apartment she just moved into. She thinks she will be a lot happier if she finds a place she can buys. Over dinner, Sean mentions he is moving to Toronto and looking to sell his condo. Mo has $1,000,000 in cash and values the condo at $600,000. The next morning, Mo understands that Colin, another friend, made an offer of $550,000. What is Sean's threat value? Question 17 options: $500,000 $1,600,000 $1,000,000 $550,000
Holly's utility function is U(c1, c2) = c/21 + 0.87d/22, where cq is her consumption in period 1 and c2 is her consumption in period 2. In period 2, her income is twice as large as her income in period 1. At what interest rate will she choose to consume the same amount in period 2 as in period 1? (Choose the closest answer.) Group of answer choices 0.30 0.08 0.23 0.15
Dana was dating Wade, a wealthy real estate entrepreneur. Wade was much older than Dana and knew he needed to offer something “special” to make her stay. Wade told Dana that if she continued dating him, he would pay her $10,000 a month. Wade paid Dana for two years when suddenly, for no apparent reason, he stopped the monthly payments. Dana stayed with Wade for another six months, but decided enough was enough and left. She wanted the $60,000 she was owed for the six months; Wade refused to pay her. Is Dana entitled to the $60,000?
Suppose you have a monthly income of $1000, $850 in monthly expenses, and you can put money in a savings account that yields a monthly interest rate of 4%. Now suppose you have an opportunity to invest your money at a 12% return. Further suppose you are able to borrow at 3%. Assuming you invest all of your money and then borrow against your future payout, show your trade-off between present and future consumption. If you still need to consume $850 in the present, how much will you have to spend in the future?
In many cities, discount clubs are popular. For a fixed annual fee (paid in advance) one can purchase goods at 90% of their listed price (in other words, 10% off the list price); otherwise, one pays the list price. Suppose that the annual fee is $300 and the interest rate on your savings account is 5%. Finally, assume discount club's list prices are the same as any other store, and you plan to spend $4000 over the coming year at this store. (Hint: the interest represents an opportunity cost of purchasing a membership). benefit not buying is a membership I dollars and the cost of not buying The of a membership is dollars. Please record your answer without a dollar sign or a comma.
I need help in solving this problem.
If the total interest paid equals the borrowed principal over 20 years, determine the discount rate applied. Determine the equivalent simple interest rate.
Fatima has a credit card account with Bank Muscat (BM). The bank is considering whether to raise Fatima’s credit card interest rate. She can respond by moving to National Bank of Oman (NBO) or do nothing. If BM raises Fatima’s interest rate and she does nothing, then BM increases profit by 150 OMR while Fatima receives -150 OMR. If BM raises Fatima’s interest rate and Fatima transfers her account to NBO, then BM receives -100 and she receives 75 OMR. If BM does nothing and she does nothing, then both gets 0 OMR. If BM does nothing and Fatima transfer her account to NBO then BM receives -100 while Fatima receives -40 OMR 1)Draw the game with the help of a tree chart.