You currently have $200 in the bank which pays a 5% pa interest rate. Apples currently cost $1 each at the shop and the inflation rate is -6% pa (note the negative sign) which is the expected growth rate in the apple price. All rates are given as effective annual rates. Which of the below statements is NOT correct? Select one: 

a). In 1 year the nominal apple price will be $0.94. 

b). The real growth rate in the apple price is expected to be 0% pa. 

c). In 1 year your money in the bank will be worth $188 in nominal terms. 

d). In 1 year your money in the bank will be worth $223.404255 in real terms. 

e). The real bank interest rate is 11.702128% pa.

rn

Answer rating: 100% (QA)

The statement that is not correct is sta... View the full answer