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Clare and Raymond each receive $55,000 from their great-aunt. Clare is worried about inflation over the next 7 years, and decides to place her money
Clare and Raymond each receive $55,000 from their great-aunt. Clare is worried about inflation over the next 7 years, and decides to place her money into an inflation protected account earning a real interest of 7.9% per annum compounded monthly. On the other hand, Raymond thinks the inflation rate will be low over the next 7 years, so decides to place his money into a regular account earning interest at 12.5% compounded quarterly. If the actual annual effective rate of inflation turns out to be 3.2%, calculate the ratio of Clare 's purchasing power to Raymond 's purchasing power. Answer to 3 decimal places. Number What would the annual effective rate of inflation need to be for the purchasing powers to be equal? Answer as a decimal to 4 places. Number
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