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October 31, 2014

October 31, 2014

Posted by **nan** on Sunday, February 26, 2012 at 4:07pm.

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.

- math -
**Henry**, Tuesday, February 28, 2012 at 11:22am1a. $3000.

2. Pt = 3000 * 1.20 = $3600 after 1yr.

N = $3600 / $10. = 360 Tickets.

3. N = $3600 / (1.2*$10) = 300 Tickets.

4. Same procedure as #3.

5. Rate = 20%.

6. Rate = 2o% - 20% = 0%.

7. Rate = 20 - 25 = -5%.

8. The wording of the prob. and the choices doesn't seem to match.However,

as the inflation rate increases from zero, the buying power decreases.

- math -
**Jack**, Tuesday, October 1, 2013 at 11:34amI have no idea

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