Question

Suppose Susan is an avid reader and buys only comic books. Susan deposits $1,000 in a bank account that pays an annual nominal interest rate of 5%. Assume this interest rate is fixed—that is, it won't change over time. At the time of her deposit, a comic book is priced at $10.00. Initially, the purchasing power of Susan's $1,000 deposit is _________comic books.

Answer 1

Answer:

100 comic books

Explanation:

Data provided in the question

Amount deposit in a bank account = $1,000

Annual nominal interest rate = 5%

Price of a comic book = $10

So by considering the above information, the purchasing power would be

= Amount deposit in a bank account ÷ Price of a comic book

= $1,000 ÷ $10

= 100 comic books

In order to determine the purchasing power we divide the deposit amount by the price of a comic book