Steven Puts Money into an Account

question 167

Multiple Choice

Steven puts money into an account.One year later he sees that he has 6 percent more dollars and that his money will buy 2 percent more goods.

• A)The nominal interest rate was 8 percent and the inflation rate was 6 percent.
• B)The nominal interest rate was 6 percent and the inflation rate was 4 percent.
• C)The nominal interest rate was 4 percent and the inflation rate was 2 percent.
• D)None of the above is correct.

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Definitions:

Compounded Annually

refers to the process where interest earned on an investment is added to the principal sum at the end of each year, with each subsequent interest calculation based on the previous year's total.

Stereo

A system for reproducing sound that uses two or more independent audio channels to create a sense of location and fullness.

Invest

Deploying resources, specifically money, with the target of income or profit realization.

One-time Payment

A single financial transaction, often made for a specific purpose or to settle a liability.