How Long Will It Take for the Purchasing Power of $1

question 113

Multiple Choice

How long will it take for the purchasing power of $1 to be cut in half if inflation is 4%?

• A) 4.97 years
• B) 7.42 years
• C) 10.72 years
• D) 17.67 years

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Definitions:

Interest Expense

The amount an entity pays over time for the use of borrowed funds.

General Journal Entry

A general journal entry is a record of financial transactions in the accounting records of a business.

Notes Payable

This refers to a written promise to pay a certain amount of money, usually including interest, by a specific date, and is recognized as a liability on a company's balance sheet.

Effective Interest Method

An accounting practice used to allocate loan or bond interest expense over the life of the loan or bond based on the loan's amortized cost.