Gce Model Questions Vol1 2024 Economics Question 38

Practice objective / multiple choice question 38 from the 2024 Gce Model Questions Vol1 Economics examination.

Gce Model Questions Vol1 2024 Economics Objective / Multiple Choice Medium Difficulty
Question 38 GCE_MODEL_QUESTIONS_VOL1 • 2024 • ECONOMICS • objective

In year 1 the Consumer Price Index (CPI) is 120 (base year 0 = 100) and in year 2 it is 138. A government bond yields a nominal interest rate of 12 % per annum. (a) Calculate the inflation rate between year 1 and year 2. (b) Using the Fisher equation, find the approximate real interest rate for year 2. (c) If a saver wishes to retain the purchasing power of \(10{,}000\) Naira invested at the start of year 2, what nominal amount must be available at the end of year 2? Compare this required amount with the amount actually obtained from the bond.

Answer Options

Correct Answer A. Required nominal amount = 11,500 Naira; actual amount from bond = 11,200 Naira; shortfall = 300 Naira.
B. Required nominal amount = 11,600 Naira; actual amount from bond = 11,200 Naira; shortfall = 400 Naira.
C. Required nominal amount = 11,400 Naira; actual amount from bond = 11,200 Naira; shortfall = 200 Naira.
D. Required nominal amount = 11,500 Naira; actual amount from bond = 11,300 Naira; shortfall = 200 Naira.
Correct Answer
A
Correct Option:
Required nominal amount = 11,500 Naira; actual amount from bond = 11,200 Naira; shortfall = 300 Naira.

About This Question

This is Gce Model Questions Vol1 2024 Economics Question 38. It is one of the objective questions from the 2024 Gce Model Questions Vol1 Economics examination.

Difficulty level: Medium .

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