Table 24-11. Megan's salary for three consecutive years, along with other values, is presented in the table below.
-Refer to Table 24-11. Suppose the consumer price index for 2013 is not necessarily 235. If the nominal interest rate for 2013 is 7.3 percent , then the consumer price index for 2013 is, in fact,
A)239.1.
B)235.5.
C)242.7.
D)250.9.

Question

Table 24-11. Megan's salary for three consecutive years, along with other values, is presented in the table below. 
-Refer to Table 24-11. Suppose the consumer price index for 2013 is not necessarily 235. If the nominal interest rate for 2013 is 7.3 percent , then the consumer price index for 2013 is, in fact,
A)239.1. 
B)235.5. 
C)242.7. 
D)250.9.

Quizplus · Accepted Answer

The real interest rate is calculated as the nominal interest rate minus the inflation rate. If the nominal interest rate is 7.3% and the CPI for 2012 is 230, we can calculate the CPI for 2013 using the formula for inflation: (CPI in 2013 - CPI in 2012) / CPI in 2012. Solving for the CPI in 2013 gives us 242.7.