Suppose you'll have an annual nominal income of $55,000 for each of the next three years, and the inflation rate is 5 percent per year. Hint: Present value = Future value/(1 + Growth in prices), e.g., The present value of next year's income = Next year's income/(1 + Growth in prices) Instructions: Enter your responses rounded to a whole dollar. a. Find the real value of your $55,000 salary for each of the next three years. Year 1: $ Year 2: $ Year 3: $ b. If you have a COLA in your contract, what is the real value of your salary for each year?b. If you have a COLA in your contract, what is the real value of your salary for each yea r? Year 1: $ |:| Year 2: $ :| Year 3: $ E Suppose you borrow $5,000 of principal that must be repaid at the end of two years, along with interest of3 percent a year. Ifthe annual inflation rate turns out to be1 percent, lnstructlons: Enter your responses rounded to the nearest whole number. If you are entering any negative numbers be sure to include a negative sign H in front of those numbers. a. What is the real rate of interest on the loan? :96 b. What is the real value of the principal repayment? Hint: Future value : Present value X (1 + Growth in pricesf, where tie the number of years evaluated, e.g., The real value of loan repayment = Amount of loan x (1 + Real interest rate)t $: c. Who loses, the debtor or the creditor? Creditor DebtorAccording to the table below, Change in Value Asset (%) , 1991-2001 Stocks +250 Diamonds +71 oil +66 Housing +56 U. S. farmland +49 Average price +32 level Silver +22 Bonds +20 Stamps -9 Gold -29What happened during the period shown to the a. Nominal price of U5. farmland? The nominal price (Click to select v by E percent. b. Real price of US. farmland? The real price by :| percent. THE ECONOMY TOMORROW: If home prices are expected to rise in the future, will you be more or less likely to buy a house now? 0 Less likely, because inflation redistributes income and wealth in unacceptable ways. 0 More likely, because expectations of rising prices can encourage more spending. '3' Less likely, because of concerns about the inflationary flashpoint. C\" More likely, because unemployment will fall. '3' More likely, because of money illusion