Question
You currently have $100 in the bank which pays a 7% pa interest rate. Apples currently cost $1 each at the shop and the inflation
You currently have $100 in the bank which pays a 7% pa interest rate. Apples currently cost $1 each at the shop and the inflation rate is 4% pa which is the expected growth rate in the apple price. All rates are given as effective annual rates. Which of the below statements is NOT correct?
Select one: a. In 1 year the nominal apple price will be $1.04.
b. The real growth rate in the apple price is expected to be 0% pa.
c. In 1 year your money in the bank will be worth $107 in nominal terms.
d. In 1 year your money in the bank will be worth $102.884616 in real terms.
e. The real bank interest rate is 3% pa.
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