Suppose You Have $1000 That You Deposited into a Savings

question 39

Essay

Suppose you have $1000 that you deposited into a savings account that pays 5 percent per year. According to reports you hear in the news, the inflation rate this year is about 6 percent.
(a) What is the nominal value of the savings account after 1 year?
(b) In real terms, what is the value of the gain of your savings account, relative to the original $1000 deposit?

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Definitions:

Shareholders

Individuals or entities that own shares in a corporation, thus having a partial ownership interest in the company.

Investments

Assets or items acquired with the goal of generating income or appreciation in value over time.

Returns

A term used in finance to describe the profit or loss derived from investing or saving.

Risk

Exposure to danger, harm, or loss, often considered in financial contexts such as investments or business ventures.