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Author Question: The real rate is 2.50 and inflation is 3.25. What is the approximate nominal rate? A) 5.75 B) ... (Read 27 times)

Arii_bell

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on: Jul 10, 2018
The real rate is 2.50 and inflation is 3.25. What is the approximate nominal rate?
 
  A) 5.75
  B) 5.25
  C) 3.25
  D) 1.25

Question 2

You put 100 in a bank for a fixed two year term. The interest rate on the loan is 8 per annum, compounded semi-annually. Because the term is fixed, you are not allowed to withdraw interest at any point.
 
  What is the total amount of interest earned in the final half-year of the term?
  A) 4.00
  B) 4.50
  C) 4.67
  D) 4.16
  E) 4.33


yotaSR5

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  • Posts: 331
Reply #1 on: Jul 10, 2018
Answer to Question 1

Answer: A
Explanation: A) Roughly speaking, the nominal rate is the real rate plus inflation. Thus, the nominal rate is 2.50 plus 3.25 equals 5.75.

Answer to Question 2

B


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