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Real and nominal rates interest Zane Perelli currently has $ 9 6 that he can spend today on socks costing $ 2 . 4 0

Real and nominal rates interest Zane Perelli currently has $96 that he can spend today on socks costing $2.40 each. Alternatively, he could invest the $96 in a risk-free U.S. Treasury security
that is expected to earn a 8% nominal rate of interest. The consensus forecast of leading economists is a 4% rate of inflation over the coming year.
a. How many socks can Zane purchase today?
b. How much money will Zane have at the end of 1 year if he forgoes purchasing the socks today and invests his money instead? (Ignore taxes.)
c. How much would you expect the socks to cost at the end of 1 year in light of the expected inflation?
d. Use your findings in parts b and c to determine how many socks (fractions are OK) Zane can purchase at the end of 1 year. In percentage terms, how many more or fewer socks can Zane buy at
the end of 1 year?
e. What is Zane's approximate real rate of return over the year? How is it related to the percentage change in Zane's buying power found in part d? Explain.
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