John Smith made a one year investment that generated a nominal return of 6% or $3000. The real return was $2000. What was the or
iginal investment amount? what was the annual inflation rate? Macroeconomic
1 answer:
The nominal value - without discounting the inflation rate - of income was $ 3000.
If the interest rate was 6%, a rule of three is enough to find the value of the original investment.
3000 - 6%
x - 100%
x = 50,000
The value of the investment was $ 50,000
In this case, the inflation rate also requires a simple calculation.
Inflation corroded $ 1000 dollars of income of $ 3000
Therefore the inflation rate will be 1000/3000 = 33.3%
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