Suppose You Put $100 in the Bank on January 1

question 53

Multiple Choice

Suppose you put $100 in the bank on January 1, 2017. If the annual nominal interest rate is 5 percent and the inflation rate is 2 percent, you will be able to buy ________ worth of goods on January 1, 2018, valued at 2017's prices.

• A) $93
• B) $107
• C) $103
• D) $105
• E) $99

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Definitions:

Working Capital

The difference between a company's current assets and current liabilities, indicating the short-term financial health and operational efficiency.

Book Value Per Share

A financial measure that indicates the value of a company's equity as represented in its shares, calculated by dividing total shareholders' equity by the number of outstanding shares.

Market Price

The current price at which an asset or service can be bought or sold.

Common Share

A type of equity ownership in a corporation, representing a fraction of the total ownership, where each share entitles the holder to a vote at company meetings and a share in the company’s profits.