1) Lee pays one percent per month interest on his credit card account. When his monthly rate is multiplied by 12, the resulting answer is referred to as the: annual percentage rate. compounded rate. effective annual rate. perpetual rate. simple rate. 2) Investors of government bonds require an 8% per annum real return. The inflation rate (CPI) is 5.50%. What is the exact nominal rate? Select one: a. 13.94% b. 10.50% c. 2.50% d. 13.50% e. 12.91%

Answer: 2. Real rate = ((1+nominal rate)/(1+inflation rate))-1 let the nominal rate be 'a' 0.08=((1+a)/(1+0.055))-1 1+0.08=(1+a)/1.055 1.08=(1+a)/1.055 1+a=1.1394 a=1.1394-1 a= 13.94% PFA

Trusted by Students Everywhere

Why Choose Us?

0% AI Guarantee

Human-written only.

24/7 Support

Anytime, anywhere.

Plagiarism Free

100% Original.

Expert Tutors

Masters & PhDs.

100% Confidential

Your privacy matters.

On-Time Delivery

Never miss a deadline.

1) Lee pays one percent per month interest on his credit card account

Accounting May 23, 2021

1) Lee pays one percent per month interest on his credit card account. When his monthly rate is multiplied by 12, the resulting answer is referred to as the:

		annual percentage rate.
		compounded rate.
		effective annual rate.
		perpetual rate.
		simple rate.

2) Investors of government bonds require an 8% per annum real return. The inflation rate (CPI) is 5.50%. What is the exact nominal rate?

Select one:

a. 13.94%

b. 10.50%

c. 2.50%

d. 13.50%

e. 12.91%

Expert Solution

Answer:

2.

Real rate = ((1+nominal rate)/(1+inflation rate))-1
let the nominal rate be 'a'
0.08=((1+a)/(1+0.055))-1
1+0.08=(1+a)/1.055
1.08=(1+a)/1.055
1+a=1.1394
a=1.1394-1
a=	13.94%

PFA

Download Solution Attachment (PDF/Doc)

Archived Solution

Unlocked Solution

You have full access to this solution. To save a copy with all formatting and attachments, use the button below.

Already a member? Sign In

Important Note: This solution is from our archive and has been purchased by others. Submitting it as-is may trigger plagiarism detection. Use it for reference only.

For ready-to-submit work, please order a fresh solution below.

Or get 100% fresh solution

Get Custom Quote