If the effective annual interest rate is 8.00% per year and inflation is 3.25% per year what is the real effective annual interest rate with inflation considered?

The index number representing the price level changes from 110 to 115 in one year and then from 115 to 120 the next year. Since the index number increases by five each year, is five inflation rate each year? Is the inflation rate the same each year? Explain your answer.

A fixed-rate mortgage has the same interest rate over the life of the loan, whether the mortgage is for 15 or 30 years. By contrast, an adjustable-rate mortgage changes with market interest rates over the life of the mortgage. If inflation falls unexpectedly by 3, what would likely happen to a homeowner with an adjustable-rate mortgage?

The total price of purchasing a basket of goods in the United Kingdom over four years is: year 1=940, year 2=970, year 3=1000, and year 4=1070. Calculate two price indices, one using year 1 as the base year (set equal to 100) and the other using year 4 as the base year (set equal to 100). Then, calculate the inflation rate based on the first price index. If you had used the other price index, would you get a different inflation rate? If you are unsure, do the calculation and find out.

What is the total amount of interest from a 5,000 loan after three years with a simple interest rate of 6?

Go to this website (http://www.measuringworth.com/ppowerus/) for the Purchasing Power Calculator at measuringWorth.com. How much money would it take today to purchase what one dollar would have bought in the year of your birth?

Inflation rates, like most statistics, are imperfect measures. Can you identify some ways that the inflation rate for fruit does not perfectly capture the rising price of fruit?

Table 22.4 shows the fruit prices that the typing college student purchased from 2001 to 2004. What is the amount spent each year on the basket of fruit with the quantities shown in column 2?