Posted by
**Katie** on
.

The nominal rate of interest is 8% and the rate of inflation is 5%. A single deposit is invested for 10 years. Let:

A= value of the investment at the end of 10 years measured in "constant dollars," i.e. in dollars valued at time 0.

B= value of the investment at the end of 10 years computed at the real rate of interest.

Find the ratio A/B.