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If you lend your cousin $100 to be paid back in a year at 5% interest,
In one year, what amount will you earn if there is no inflation vs if there is 3% inflation?
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- Assume the economy is experiencing low and stable inflation, averaging 2% a year. Nadia loans her good friend Brett $12,000 to buy a car. Nadia and Brett agreed that he would repay the loan over the next 5 years at a 5% fixed interest rate. How would Nadia and Brett be affected if next year the inflation rate unexpectedly rises to 6%?11. Shelia earns $12.00 per hour. During her performance review, her boss gave her a $0.35 raise. Is this enough to keep up with the annual average rate of inflation?If inflation is 2% and Nominal interest rate is 2.7% Find real interest rate
- Roger Marquez purchases a lot for $ 40,000 cash and plans to sell it after 5 years for $ 122,461. If he wants an 18% interest on his investment after taking the x% inflation rate into account, what must be the value of x, the rate of inflation? a. 5 b. 2 c. 6 d. 4Inflation is a general increase in prices and may be measured by the Consumer Price Index (CPI). Use Appendix A to answer the questions. In Year 1 the CPI was 100; 25 years later, it was 225. What was the annual rate of inflation? Round your answer to the nearest whole number. % Nancy and Pam both currently earn $110,000. If the annual rate of inflation is 4 percent, how much must each earn after eleven years to maintain their purchasing power? Round your answer to the nearest dollar.$ Your parents bought a home for $50,000 in Year 1 and sold it in Year 31 for $280,000. What was the annual rate of price increase over the 30 years? Round your answer to the nearest whole number. %Sam bought a rental property for 500,000 five years ago. He sold the property this year for $2,200,000 and spent $343,335 fixing it up before selling the property. If the inflation rate for the past 5 years has been steady at 5% annually. a. What is the actual interest rate of this investment? b. What is the real interest rate Sam earned?
- 1. Sally Johnson loaned a friend $10,000 at 15% interest, compounded annually. The loan will be paid in four equal end-of-year payments. Sally expects the inflation rate to be 3%. After taking inflation into account, what rate of return is Sally receiving on the loan? Compute your answer to the nearest 0.1%.Forty years ago, a gallon of gas cost $1.20. Today, a gallon of gas costs 2.60. Suppose that the gas price increase has been entirely due to inflation. a. Calculate the annual inflation rate. b. Today, you plan to make a cash purchase for a new car. The Model K costs $24,000 and you estimate the car will last 10 years and require 600 gallons per year. The Model M costs $28,000 but gets better mileage, so it will only require 400 gallons per year. The cars are identical in all other respects, and they will both be worthless after 10 years. Assume that gas prices will rise by the rate of inflation (that you calculated in part a. Further assume that all gas expenditures are incurred at the end of the year. If the nominal interest rate is 9% per year, which car should you purchase? Show all calculations and explain carefully.write on paper 1- The current gasoline price is $4.50 per gallon, and it is projected to increase by 5% the next year, 7% the following year, and 8% the third year. What is the average inflation rate for the projected gasoline price for the next three years?
- Find inflation rate if real interest rate is 3% and nominal interest rate is 4.3%3. An economist has predicted that for the next 5 years, the U.S. will have a 2.5% annual inflation rate, followed by 5 years at a 3.5% inflation rate. This is equivalent to what average price change per year for the entire 10-year period?Ten years ago, an item cost $2,500. The rate of inflation for the first 4 years was 4%, during the next 3 years, 6%; and for the last 3 years, 9%. Assuming that increases in price were due to inflation alone, what would the item cost now?