18. Suppose you lived in a world where just one good is produced and consumed: apples....

 

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18. Suppose you lived in a world where just one good is produced and consumed: apples. You decide to open a savings account with an initial deposit of $1000. At that time, an apple costs $1.25. Three years later, you decide to close your account. The balance has increased to a value of $1207.95. Assume that you haven't made any additional deposits or withdrawals over the intervening three years. At the time that you close your account, the price of an apple has increased to $1.45. a. What nominal interest rate did you earn on your deposit? b. What was the "real" value of your $1000 deposit when you opened your account? c. What was the "real" value of your account balance when you closed the account? d. What was the average (per-year) rate of inflation over the three years that you had the savings account? e. What real interest rate did you earn on your deposit? 18. Suppose you lived in a world where just one good is produced and consumed: apples. You decide to open a savings account with an initial deposit of $1000. At that time, an apple costs $1.25. Three years later, you decide to close your account. The balance has increased to a value of $1207.95. Assume that you haven't made any additional deposits or withdrawals over the intervening three years. At the time that you close your account, the price of an apple has increased to $1.45. a. What nominal interest rate did you earn on your deposit? b. What was the "real" value of your $1000 deposit when you opened your account? c. What was the "real" value of your account balance when you closed the account? d. What was the average (per-year) rate of inflation over the three years that you had the savings account? e. What real interest rate did you earn on your deposit?