CENGAGE | MINDTAP Homework (Ch 11) Back to Assignment Attempts 2 Keep the Highest 2 / 3 5. Interest, inflation, and purchasing power Suppose Amy is an avid reader and buys only mystery novels. Amy deposits $2,000 in a bank account that pays an annual nominal interest rate of 10%. Assume this interest rate is fixed-that is, it won't change over time. At the time of her deposit, a mystery novel is priced at $10.00. Initially, the purchasing power of Amy's $2,000 deposit is mystery novels. For each of the annual inflation rates given in the following table, first determine the new price of a mystery novel, assuming it rises at the rate of inflation. Then enter the corresponding purchasing power of Amy's deposit after one year in the first row of the table for each inflation rate. Finally, enter the value for the real interest rate at each of the given inflation rates. Hint: Round your answers in the first row down to the nearest mystery novel. For example, if you find that the deposit will cover 20.7 mystery novels, you would round the purchasing power down to 20 mystery novels under the assumption that Amy will not buy seven-tenths of a mystery novel. Annual Inflation Rate 0% 10% 13% Number of Novels Amy Can Purchase after One Year Real Interest Rate % % % When the rate of inflation is less than the interest rate on Amy's deposit, the purchasing power of her deposit over the course of the year. Grade It Now Save & Continue