Question

Jane wishes to invest $ 20,000 for one year provided that she can anticipate 5 %...

Jane wishes to invest $ 20,000 for one year provided that she can anticipate 5 % growth in her buying power. She forecasts that the inflation rate for the upcoming year will be 1 %.
a) What is the lowest rate at which she would be willing to make a loan?

(4 decimal accuracy)
b) What rate of growth in her buying power does she look forward to if she is able to loan out her money for exactly one year at an annual effective interest rate of 6 %?

(4 decimal accuracy)
c) What was her actual growth in buying power if the inflation rate for the year was 1.75 % and she was able to loan out her money for exactly one year at an annual effective interest rate of 6 %?
(4 decimal accuracy)

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