2- If a 3D printer increased in cost at exactly the inflation rate, what was the inflation rate if the printer costs exactly twice as much now as it did 10 years ago?
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- The index number representing the price level changes from 110 to 115 in one year and then from 115 to 120 the next year. Since the index number increases by five each year, is five inflation rate each year? Is the inflation rate the same each year? Explain your answer.Interest RatesSuppose that you make a loan of $1,500 to your friend at a rate of 10% interest because you expect the inflation rate to be 5%.a) By how much does your purchasing power increase once the loan is completely paid off?b) Assuming that after the loan was repaid, you discovered that inflation rate over the life of the loan was only 2%. Who gained?Your rich aunt is going to give you an end-of-year gift of $1,000 for each of the next 10 years. Solve, a. If general price inflation is expected to average 6% per year during the next 10 years, what is the equivalent value of these gifts at the present time? The real interest rate is 4% per year. b. Suppose that your aunt specified that the annual gifts of $1,000 are to be increased by 6% each year to keep pace with inflation. With a real interest rate of 4% per year, what is the current PW of the gifts?
- Suppose that you just purchased a used carworth $8,000 in today’s dollars. Suppose also thatyou borrowed $8,000 from a local bank at 9% compounded monthly over two years. The bank calculated your monthly payment at $365.48. Assumingthat average general inflation will run at 0.5% permonth over the next two years,(a) Determine the monthly inflation-free interestrate (i′) for the bank.(b) What equal monthly payments (in terms of constant dollars over the next two years) are equivalent to the series of actual payments to be madeover the life of the loan?7. Using you answer for Question 2, what will be the price per MMBtu of natural gas on June 30,2022 if this average inflation rate continues for the next 60 days (a total of 180 days from December 31,2021)? The nearest answer is:a. $8 b. $9 c. $10 d. $11 e. $12 Answer for 2 was 0.5%Assuming that the inflation rate from 2018 through 2020 is 6% per year: a) What would be the real value of a $55,000 income in each of the three years? b) What does the real income computed for 2019 mean?
- Problem ##1Suppose you borrow $ 20,000 at 9% compounded monthly, for 5 years. Knowing that 9% represents the market interest rate, the monthly payment in current dollars will be $ 415.17. If the average monthly headline inflation rate is expected to be 0.5%, what will be the annual equivalent of equal monthly payments in constant dollars?Set the value for periods N in months and the effective interest per month.Suppose that you just purchased a used car worth $14.000 in today's dollars. Assume also that. to finance the purchase. you borrowed $12,000 from a local bank at 8% compounded monthly over two years. ·n1e bank calculated your monthly payment at $542.36. Assume that average general inflation will run at I% per month over the next two years.(a) Determine the annual inflation-free interest rate (i') for the bank.(b) What equal monthly payments, in terms of constant dollars over the next two years, arc equivalent to the series of actual payments to be made over the life of the loan?If you deposit $12,000 in a bank account that pays a 4% interest compounded monthly for five years, what would be your economic loss if the general inflation rate is 5% during that period?
- You would like to buy a house that is currently on themarket at $15,000, but you cannot afford it right now. However, you think that youwould be able to buy it after 15 years. If the expected inflation rate as applied to the priceof this house is 8% per year, what is its expected price after four years?6. Assume that the inflation rate will be 4% for all future years, and the interest rate is 7%. How many years will it take for the dollar to have the purchasing power that is equal to 65% of itscurrent purchasing power? (select the closest answer)a) about 7 yearsb) about 11 yearsc)about 18 yearsd) about 20 yearsAssume that the economy has an annual inflation rate of 5 percent. Are the followinginvestments profitable in real terms? (d) The spot price of silver is $31 per ounce. You purchase 50 ounces of silver for $1,600,in order to compensate the merchant. Over the year, the spot price of silver rises to $34per ounce, and you are able to sell the silver you have at the spot price. (e) You purchase a Non-Fungible Token (NFT) for $98 million. The following year, you are able to sell it for $102.5 million.
