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What happens if inflation rises by just 1 percent?

The dollar in your pocket is worth .99 of a dollar. also nominal interest=real interest+inflation so nominal interest goes up by 1%


The annual nominal rate of interest on a bank certificate of deposit is 12 percent what would be the effect of an inflation rate of 13 percent?

The 12 percent nominal interest means that your money will increase in value by 12% in a year's time in NOMINAL terms.However, the inflation rate of 13 percent says that the cost of goods will increase faster than the value of your deposit.Hence the REAL effect is that the value of your money will fall by 1 percent.


A one-year US Treasury security has a nominal interest rate of 2.25 percent If the expected real rate of interest is 1.5 percent what is the expected annual inflation rate?

Ok, this is my own question. This is what I came up with. can anyone confirm or correct?Maturity r = RR + IP1-YEAR 2.25% = 1.5% + X2.25% - 1.5% = .75%


Suppose you place 10000 in a retirement fund that earns a nominal interest rate of 8 percent If you expect inflation to be 5 percent or lower then you are expecting to earn a real interest rate of?

3 percent


The real risk-free rate of interest is 4 percent Inflation is expected to be 2 percent this year and 4 percent during the next 2 years Assume that the maturity risk premium is zero What is the yield?

The answers are 7%, 7.33%.


If Jackson is paid an interest rate of 10 percent on his savings but the inflation rate has risen to 20 percent the purchasing power of his savings is?

If Jackson is earning an interest rate of 10 percent on his savings while the inflation rate is at 20 percent, his purchasing power is decreasing. This is because the inflation rate exceeds the interest rate, resulting in a net loss of value in real terms. Essentially, he is losing 10 percent of the value of his savings each year due to inflation outpacing his interest earnings. Therefore, his savings are effectively becoming less valuable over time.


How much will 180000 dollars be in 20 years with 9 percent interest and 4 percent inflation rate?

477,567


What is the nominal rate of interest per annum compounded monthly equvalent to effective interest rate of 12.60 percent per annum?

0.9938% per month, when compounded is equivalent to 12.6% annually.


Julia invested 3000 at an annual interest rate of 5 percent. From last year to this year there has been a 4 percent inflation rate. After a year the purchasing power of her investment?

rose by 1 percent


Julia invested 3000 at an annual interest rate of 5 percent. From last year to this year there has been a 4 percent inflation rate. After a year the purchasing power of her investment .?

rose by 1 percent


Julia invested 3000 at an annual interest rate of 5 percent from last year to this year there has been a 4 percent inflation rate after a year the purchasing power of her investment?

rose by 1 percent


In 2002 Ortega's nominal income rose by 4.6 percent and the price level rose by 1.6 percent. What is Ortega's real income?

the nominal income rose by 3 percent