Question

You
currently have $1000 in your savings account. The APR on your
savings account is 9%, and the interest is compounded monthly. If
the annual inflation rate is 6%, how much your current savings will
become in real terms (i.e., in today's dollars) one year from now?
Round your answer to the nearest cent; do not use the $ sign (i.e.,
if the result is $1,234.5678, enter it as 1,234.57).

Answer #1

Current investment = $1000

APR = 9% compounded monthly

So, effective annual rate = (1+APR/n)^n - 1 = (1 + 0.09/12)^12 - 1 = 9.38%

inflation = 6%

So, real rate of return = (1+effective)/(1+inflation) - 1 = 1.0938/1.06 - 1 = 3.189%

So, current savings will become in real terms (i.e., in today's dollars) one year from now = current investment*(1+real rate)

=> current savings will become in real terms (i.e., in today's dollars) one year from now = 1000*1.03189 = $1031.89

Suppose you put $2000 in a savings account at an APR of 6%
compounded monthly. Fill in the table below. (Calculate the
interest and compound it each month rather than using the compound
interest formula. Round your answers to the nearest cent.)
Please fill in all areas that have a $ sign
Month
Interest Earned
Balance
$2000
1
$
$
2
$
$
3
$
$

Your friend wants to borrow money from you. He proposes to repay
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would you lend your friend at most? Round your result to the
nearest cent, and do not use a $ sign (i.e., if the result is
$1012.4671, enter it as 1012.47)...

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his debt in 5 monthly installments of $200, starting from month 4
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monthly interest rate on your savings account is 1%, how much would
you lend your friend at most? Round your result to the nearest
cent, and do not use a $ sign (i.e., if the result is $1012.4671,
enter it as 1012.47).

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Suppose that you are now 35 and you have accumulated $87,000 in
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