Over the past year you earned a nominal rate of interest of 14 percent on your money.The inflation rate was 2 percent over the same period.The exact actual growth rate of your purchasing power was
A)11.76%.
B)16.00%.
C)15.02%.
D)14.32%.
E)none of the above.

Question

Quizplus · Accepted Answer

The actual growth rate of purchasing power can be calculated using the formula: (1 + nominal rate) / (1 + inflation rate) - 1. Substituting the given values: (1 + 0.14) / (1 + 0.02) - 1 = 0.1176 or 11.76%.

Over the Past Year You Earned a Nominal Rate of Interest