Cengage Mindtap Hw 7 Ch 11 Back To Assignment Attempts Keep The Highest 74 5 Interest Inflation And Purchasing Po 1 (25.47 KiB) Viewed 52 times
Cengage Mindtap Hw 7 Ch 11 Back To Assignment Attempts Keep The Highest 74 5 Interest Inflation And Purchasing Po 2 (31.81 KiB) Viewed 52 times
« CENGAGE MINDTAP HW#7 (Ch 11) Back to Assignment Attempts Keep the Highest 74 5. Interest, inflation, and purchasing power Suppose Crystal is an avid reader and buys only mystery novels. Crystal deposits $3,000 in a bank account that pays an annual nominal interest rate uf 5%. Assume this interest rate is fixed-that is, it won't change over time. At the time of her deposit, a mystery novel is priced at $10.00. Initially, the purchasing power of Crystal's $3,000 deposit is mystery novels. For each of the annual inflation rates given in the following table, first determine the new price of a mystery novel, assuming it rises at the rate of inflation. Then enter the coresponding purchasing power of Crystal'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 mystery novel. For example, if you find that the deposit will cover 20.7 mystery novels, you would round the purchasing power down to 20 mystery novels under the assumption that Crystal will not buy seven-tenths of a mystery novel. Annual Inflation Rate 5% 8% Number of Novels Crystal Can Purchase after One Year Real Interest Rate 0%
CENGAGE MINDTAP HW#7 (Ch 11) Suppose Crystal is an avid reader and buys only mystery novels. Crystal 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 mystery novel is priced at $10.00. Initially, the purchasing power of Crystal's $3,000 deposit is mystery novels. For each of the annual inflation rates given in the following table, first determine the new price of a mystery novel, assuming it rises at the rate of inflation. Then enter the corresponding purchasing power of Crystal'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 mystery novel. For example, if you find that the deposit will cover 20.7 mystery novels, you would round the purchasing power down to 20 mystery novels under the assumption that Crystal will not buy seven-tenths of a mystery novel Annual Inflation Rate 5% 0% 8% Number of Novels Crystal Can Purchase after One Year Real Interest Rate When the rate of inflation is greater than the interest rate on Crystal's deposit, the purchasing power of her deposit course of the year. over the
Join a community of subject matter experts. Register for FREE to view solutions, replies, and use search function. Request answer by replying!