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HW 3. - Name Economics 2105 Fall 2007 Homework#3 Multiple...

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Name: ________________________ Economics 2105 Fall 2007 Homework #3 Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. ____ 1. Suppose the CPI was 108 in 1967, and suppose one must spend \$936 today to obtain the same basket of goods and services that could be bought for \$200 in 1967. Then today’s CPI is a. 410.10. b. 433.33. c. 468.00 d. 505.44. ____ 2. In the country of Hyrkania, the CPI in 2000 was 120 and the CPI in 2001 was 132. Jake, a resident of Hyrkania, borrowed money in 2000 and repaid the loan in 2001. If the nominal interest rate on the loan was 12 percent, then the real interest rate was ____ 3. An indexed government bond pays 3% nominal interest, a non-indexed government bond pays 7% nominal interest, and a corporate bond pays 12% nominal interest. What is the default premium for the corporate firm? ____

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