Question:$01$

Year $2008$

NGDP $864\mathrm{.}5$

RGDP $845\mathrm{.}5$

Year $2009$

NGDP $882\mathrm{.}6$

RGDP $851\mathrm{.}9$

Year $2010$

NGDP $923\mathrm{.}4$

RGDP $875\mathrm{.}1$

$($a$)$ Calculate the GDP deflator for each year in the table below. What is the rate of inflation from $2008$ to $2010?$

b$)$ Your boss gave you a raise this year that increased your salary from $$72,000$ to $$75,000.$ The CPI for this year is $106$ compared to last year $($the base year$).$ Has your real wage rate increased or decreased from last year?

Question:$02$

Suppose you have just inherited $$10,000$ and are considering the following options for investing the money to maximize your return:

Option $1$: Put the money in an interest$-$bearing checking account that earns $2\%$ monthly compounding for a year. Option $2$: Invest the money in a corporate bond with a stated ROI of $30$ percent.

Option $3$: Loan the money to one of your friend's roommates, Mike, at an agreed$-$upon interest rate of $8\%$ per annum, compounded daily for a year.

Option $4$: Hold the money in cash and earn zero return.

Question:$03$

Re $=$ Rof

The efficient market hypothesis assumes that prices of securities in financial markets fully reflect all available information. You may recall that the rate of return from holding a security equals the sum of the capital gain on the security $($the change in the price$),$ plus any cash payments, divided by the initial purchase price of the security. Derive Equation.