PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Question
Chapter 6, Problem 9P
(a)
To determine
Identify the nominal rate of interest.
(b)
To determine
Identify the decision of Person S.
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Check out a sample textbook solutionStudents have asked these similar questions
Frank is lending $1,000 to Sarah for two years. Frank and Sarah agree that Frank should earn a 2 percent real return per year.
Instructions: Enter your responses as as whole numbers.
a. The CPI (times 100) is 100 at the time that Frank makes the loan. It is expected to be 110 in one year and 121 in two years. What
nominal rate of interest should Frank charge Sarah?
The nominal rate of interest charged should be
%.
b. Suppose Frank and Sarah are unsure what the CPI will be in two years. How should Frank index Sarah's annual repayments to
ensure that he gets an annual 2 percent real rate of return.
Frank should charge Sarah)
% (Click to select) the inflation rate.
Maddie's nominal income was $33,000 in 2012. In 2013, because of her excellent work ethic, she received a raise that increased her nominal income to $35,000. Maddie knew a lot about inflation so she decided to see how much of a raise she really received. After researching the consumer price index at the Bureau of Labor Statistics web site, she found that the CPI for 2012 was 110 and that it jumped to 125 in 2013. Calculate the percent change in Maddie's real income after she was given a raise. Was she hurt or helped by this unanticipated inflation? Explain.
Sally worked hard all year and put her savings into a mutual fund that paid a nominal interest rate of
6
percent a year. During the year, the CPI increased from
175
to
182
.
What was the real interest rate that Sally earned?
Sally earned a real interest rate of
enter your response here
percent per year.
>>>
Answer to 1 decimal place.
>>>
If your answer is negative, include a minus sign. If your answer is positive, do not include a plus sign.
Chapter 6 Solutions
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
Ch. 6 - Prob. 1RQCh. 6 - Prob. 2RQCh. 6 - Prob. 3RQCh. 6 - Prob. 4RQCh. 6 - Prob. 5RQCh. 6 - Prob. 6RQCh. 6 - Prob. 7RQCh. 6 - Prob. 8RQCh. 6 - Prob. 1PCh. 6 - Prob. 2P
Ch. 6 - Prob. 3PCh. 6 - Prob. 4PCh. 6 - Prob. 5PCh. 6 - Prob. 6PCh. 6 - Prob. 7PCh. 6 - Prob. 8PCh. 6 - Prob. 9PCh. 6 - Prob. 10PCh. 6 - Prob. 6.1CCCh. 6 - Prob. 6.2CCCh. 6 - Prob. 6.3CCCh. 6 - Prob. 6.4CCCh. 6 - Prob. 6.5CCCh. 6 - Prob. 6.6CCCh. 6 - Prob. 6.7CCCh. 6 - Prob. 6.8CCCh. 6 - Prob. 6.9CC
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