Suppose your annual nominal income for the next four years is $78,500, and the annual inflation rate is 7.1%. Calculate the real value of your $78,500 salary at the end of the fourth year.
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Suppose your annual nominal income for the next four years is $78,500, and the annual inflation rate is 7.1%. Calculate the real value of your $78,500 salary at the end of the fourth year.
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When the income of a consumer is calculated on the basis of the current year's price, then the income is considered as nominal income.
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- Suppose that the inflation rate during a year is 5 per cent. During that year, you deposited $500 in your bank account and received an annual nominal interest rate of 10 per cent. What is the real purchasing power of your deposit at the end of the year? $500 $550 $525 $523Suppose Ginny is an avid reader and buys only comic books. Ginny deposits $3.000 in a bank account that pays an annual nominal interest rate of 10%. Assume this interest rate is fixed-that is, it won't change over time. At the time of her deposit, a comic book is priced at $15.00. Initially, the purchasing power of Ginny's $3,000 deposit is comic books. For each of the annual inflation rates given in the following table, first determine the new price of a comic book, assuming it rises at the rate of inflation. Then enter the corresponding ourchasing power of Cinny's deposit ater one vear in the first row of the table for each inflation rate. Finally, enter the value for the real interest rate at each of the given inflation rates. Hint: Round your answers in the first row down to the nearest comic book. For example, if you find that the deposit will cover 20.7 comic books, yor would round the purchasing power down to 20 comic books under the assumption that Ginny will not buy…Michelle has won a prize that will pay her $1000 per year, starting one year from today,for 15 years. Inflation is expected to be 3% per year for the next 15 years, and her interest rate is 5% per year. What is the present value of this prize today? (Treat the 3% inflation as a negative 8, thus g = -3%, and i is 5%)
- Suppose Damaris is a sports fan and buys only football tickets. Damaris deposits $3,000 into a savings account that pays an annual nominal interest rate of 5%. Assume this interest rate is fixed, and so it will not change over time. On the day she makes her deposit, suppose that a football ticket has a price of $15.00. Initially, Damaris's $3,000 deposit has a purchasing power of football tickets. For each of the annual inflation rates given in the following table, first determine the new price of a football ticket, assuming it rises at the rate of inflation. Then enter the corresponding purchasing power of Damaris's deposit after one year in the first row of the table for each inflation rate. Finally, enter the value for the real interest rate at each of the given inflation rates. Hint: Round your answers in the first row down to the nearest football ticket. For example, if you find that the deposit will cover 20.7 football tickets, you would round the purchasing power down to 20…Today you borrowed $90,000 from a bank at an interest rate of 10.25%, compounded monthly. You are supposed to repay the loan and its interest charges in equal monthly payments over a 15-year period, with the first payment in a month from now. The estimated annual inflation rate is 6%, compounded monthly.(a) What is the amount of your monthly payments?(b) What is the bank's real effective annual rate of return on this deal after taking inflation into account?Suppose Cho is a cinephile and buys only movie tickets. Cho deposits $3,000 in a bank account that pays an annual nominal interest rate of 10%. Assume this interest rate is fixed—that is, it won't change over time. At the time of her deposit, a movie ticket is priced at $15.00. For each of the annual inflation rates given in the following table, first determine the new price of a movie ticket, assuming it rises at the rate of inflation. Then enter the corresponding purchasing power of Cho's deposit after one year in the first row of the table for each inflation rate. Finally, enter the value for the real interest rate at each of the given inflation rates. Hint: Round your answers in the first row down to the nearest movie ticket. For example, if you find that the deposit will cover 20.7 movie tickets, you would round the purchasing power down to 20 movie tickets under the assumption that Cho will not buy seven-tenths of a movie ticket. Fill in the annual inflation chart Choices…
- "An annuity provides for 15 consecutive end-of-year payments of $73,000 in actual dollars. The general inflation rate is 5% annually, and the inflation-free interest rate is 5% annually. What is the present value of the annuity after considering the effects of inflation?"Suppose Rosa is a cinephile and buys only movie tickets. Rosa deposits $3,000 in a bank account that pays an annual nominal interest rate of 5%. Assume this interest rate is fixed-that is, it won't change over time. At the time of her deposit, a movie ticket is priced at $10.00. Initially, the purchasing power of Rosa's $3,000 deposit is movie tickets. For each of the annual Inflation rates given in the following table, first determine the new price of a movie ticket, assuming it rises at the rate of inflation. Then enter the corresponding purchasing power of Rosa's deposit after one year in the first row of the table for each inflation rate. Finally, enter the value for the real interest rate at each of the given inflation rates. Hint: Round your answers in the first row down to the nearest movie ticket. For example, if you find that the deposit will cover 20.7 movie tickets, you would round the purchasing power down to 20 movie tickets under the assumption that Rosa will not buy…A loan has an interest rate of 8%, and the inflation rate is 2.4%. What is the loan’s real interest rate adjusted for inflation?
- You and your spouse just adopted twin girls, little Heather and Beth. You want to make sure they are taken care of for the next 22 years. (A)Based on the following information, how much life insurance needs to be purchased for the husband using the income approach, if any? (B) How much, if any, needs to be purchased for the wife using the income approach? Assume 3% inflation rate. Market Labor Value Household Production Value Husband $72,000 $15,000 Wife $15,000 $40,000Suppose Dina is an avid reader and buys only comic books. Dina deposits $3,000 in a bank account that pays an annual nominal interest rate of 5%. Assume this interest rate is fixed—that is, it won't change over time. At the time of her deposit, a comic book is priced at $10.00. Initially, the purchasing power of Dina's $3,000 deposit is comic books. For each of the annual inflation rates given in the following table, first determine the new price of a comic book, assuming it rises at the rate of inflation. Then enter the corresponding purchasing power of Dina's deposit after one year in the first row of the table for each inflation rate. Finally, enter the value for the real interest rate at each of the given inflation rates. Hint: Round your answers in the first row down to the nearest comic book. For example, if you find that the deposit will cover 20.7 comic books, you would round the purchasing power down to 20 comic books under the assumption that Dina will not buy…Assume the nominal rate of return is 8.63% and the real rate is 4.68%. Find the inflation rate of return using the exact formula.
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