Sam saved $5,000 from his income last year and decided to deposit it at a bank in a saving account. At the end of the year, his deposit account balance reached a total value of $5,200. During the year, the consumer price index rose from 250 to 265. a. Calculate Sam's nominal interest rate. Show your work. b. Calculate Sam's real interest rate. Show your work. Explain whether Sam experienced an increase or decrease in the purchasing power of his saving over the year.

Sam saved $5,000 from his income last year and decided to deposit it at a bank in a saving account. At the end of the year, his deposit account balance reached a total value of $5,200. During the year, the consumer price index rose from 250 to 265. a. Calculate Sam's nominal interest rate. Show your work. b. Calculate Sam's real interest rate. Show your work. Explain whether Sam experienced an increase or decrease in the purchasing power of his saving over the year.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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