Posted by **nan** on Sunday, February 26, 2012 at 2:02pm.

Suppose Caroline is a cinephile and buys only movie tickets. Caroline deposits $3000 in a bank acct that pays an annual interest rate of 20%. You can assume that 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 Caroline’s $3000.00 deposit is a. 3,000 b. 50 c. 220

d. 300 e. 200 movie tickets.

The price of a movie ticket rises at the rate of inflation. For each of the annual inflation rates in the following table, select the corresponding purchasing power of Caroline’s deposit after one year, and enter the value for the real interest rate.

HINT: Round your answers down to the nearest movie ticket. For ex: if you find that the deposit will cover 20.7 movie tickets, you would round the purchasing poser down to 20 movie tickets under the assumption that Caroline will not buy seven-tenths of a movie ticket.

If the annual inflation rate is at 0% what would be the number of tickets Caroline can purchase after one yr.

a.230

b. 53

c.360

d. 220

If the annual inflation rate is at 20%

a. 150

b. 300

c. 50

d. 200

If the annual inflation rate is at 25%

a. 48

b. 288

c. 192

d. 196

If the annual inflation rate is at 0% what is the real interest rate

a. 10%

b. -20%

c. 0%

If the annual inflation rate is at 20% what is the real interest rate

a. 0%

b. -20%

c. 10%

d. 20%

If the annual inflation rate is at 25% what is the real interest rate

a. -25%

b. 10%

c. 20%

d. -5%

When the rate of inflation is less than the interest rate on Caroline’s deposit, the purchasing power of her deposit a. falls b. remains the same c. rises over the course of the year.

- economics -
**Anonymous**, Monday, September 29, 2014 at 11:14pm
abcdbc

- economics -
**Anonymous**, Wednesday, March 23, 2016 at 3:07am
seta

## Answer This Question

## Related Questions

- math - Please someone show me how to work this one out? Suppose Caroline is a ...
- Finance - john deposited 3000 into an account with 5% annual interest rate ...
- Economics - Suppose you deposit $5,000 in a bank which pays 10 percent interest ...
- eco - Suppose a person pays $80 of annual interest on a loan that has a 5 ...
- math - Lisa deposits $3000 in an account that pays 2% simple interest, and $4000...
- international economic - 2.) This question uses the general monetary model, in ...
- Math - Heather deposits $3000 into an account that pays simple interest at a ...
- Intermediate Algebra - Suppose you have a credit card debt of $6000. Last month...
- math - An amount of $3000 was deposited in a bank at a rate of 2% annual ...
- Finance - A bank offers your firm a revolving credit arrangement for up to $85 ...

More Related Questions