Question

Initially, Stacy earns a salary of $300 per year and Virginia earns a salary of $200 per year. Stacy lends Virginia $100 for one year at an annual interest rate of 16% with the expectation that the rate of inflation will be 12% during the one-year life of the loan. At the end of the year, Virginia makes good on the loan by paying Stacy $116. Consider an unanticipated decrease in the rate of inflation. The rise in prices and salaries turns out to be 2% over the course of the year rather than 12%. The nominal value of Stacy's salary after one year is

Answer 1

Answer:

The answer is "$306 and $204".

Explanation:

Given value:

Stacy salary = $300

Virginia salary = $200

The nominal value is 2%

Calculating the Stacy salary $= 300 \times \frac{2}{100}$

                                              $= 3 \times 2 \\\\ =6$

$\text{ Stacy salary = slaray+ percent value}$

                    $= \ 300 + \ 6\\\\= \ 306$

Calculating the Virginia salary $= 200 \times \frac{2}{100}$

                                              $= 2 \times 2 \\\\ =4$

$\text{ Virginia salary = slaray+ percent value}$

                        $= \ 200 + \ 4\\\\= \ 204$