Chapter 1 section 1.14 - over the next five years is 3.5%,...

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Chapter 1, Section 1.14 69. Calculate the nominal interest rate if the real interest rate is 6% and the rate of inflation is 4%. 70. Darren invests money in a bank account. During the year, his real rate of interest is 3% even though the rate of interest is on his account is 9%. Calculate the rate of inflation. 71. Kristen invests in an account that pays annual rate of interest of 7.1%. The annual rate of inflation is 2%. Calculate Kristen’s real rate of return. 72. A gallon of gasoline costs 3.00 today. Jon has enough money to buy 100 gallons today. Instead of buying gasoline, Jon decides to invest his money at an annual interest rate of 6%. If the annual rate of inflation
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Unformatted text preview: over the next five years is 3.5%, calculate how many gallons of gasoline Jon will be able to buy at the end of five years. 73. Today, the cost of a song on iTunes is 1.00. Drew has 100 today and could use that 100 to buy 100 songs on iTunes. Instead, Drew decides to invest the 100 at an annual effective rate of interest of 8% for the next four years. At the end of four years, Drew can buy 117 songs on iTunes. Calculate the annual effective inflation rate on iTune songs over the four year period. Answers: 69. 10.24% 70. 5.825% 71. 5.0% 72. 112.675 gallons 73. 3.8430%...
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This note was uploaded on 02/04/2012 for the course MA 373 taught by Professor Staff during the Spring '08 term at Purdue University-West Lafayette.

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