posted by .

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.
b. 53
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 -


  • economics -


Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. math

    An amount of $3000 was deposited in a bank at a rate of 2% annual interest compounded quarterly for 3yrs. The rate then increased to 3% annual interest and ws compounded quarterly for the next 3 yrs. If no money was withdrawn what …
  2. Economics

    Suppose you deposit $5,000 in a bank which pays 10 percent interest compounded twice a year. The actual annual interest rate you receive is: a- 10 b-11 c-10.25 d-12
  3. eco

    Suppose a person pays $80 of annual interest on a loan that has a 5 percent annual interest rate. The loan amount is: A. $400. B. $1,600. C. $160. D. $85. 10. Suppose a loan customer is considering two alternative $22,000 loans. Loan …
  4. Finance

    john deposited 3000 into an account with 5% annual interest rate compounde quarterly at the beginning of 2011. the bank guarantees that 5% annual interest rate for the next 10 years if john deposits 3000 every two years. assume that …
  5. international economic

    2.) This question uses the general monetary model, in which L is no longer assumed constant and money demand is inversely related to the nominal interest rate. Consider the same scenario described in the beginning of the previous question. …
  6. math

    Please someone show me how to work this one out?
  7. Math

    Heather deposits $3000 into an account that pays simple interest at a rate of 2% per year. How much interest will she be paid in the first 3 years?
  8. Intermediate Algebra

    Suppose you have a credit card debt of $6000. Last month, the bank charged you $85 interest on the deb. The solution to the equation is 85=6000/12 r represents the annual interest rate on the credit card. Find the annual interest rate …
  9. math

    Lisa deposits $3000 in an account that pays 2% simple interest, and $4000 in a second account which has a higher interest rate but is more risky. What minimum interest rate must she get on the second account in order to earn at least …
  10. pre calc

    Formulate a system of equations for the situation below and solve. Michael Perez deposited a total of $3000 with two savings institutions. Bank A pays interest at the rate of 6%/year, whereas Bank B pays interest at the rate of 7%/year. …

More Similar Questions