Question
You currently have $300 in the bank which pays a 5% pa interest rate. Apples currently cost $1 each at the shop and the inflation
You currently have $300 in the bank which pays a 5% pa interest rate. Apples currently cost $1 each at the shop and the inflation rate is -4% pa (note the negative sign) 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 3 years the nominal apple price will be $0.884736. b. The real growth rate in the apple price is expected to be 0% pa. c. In 3 years your money in the bank will be worth $347.287501 in nominal terms. d. In 3 years your money in the bank will be worth 229.280467 apples. e. The real bank interest rate is 9.375% pa.
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