Neco Model Questions Vol1 2017 Economics Question 47

Practice objective / multiple choice question 47 from the 2017 Neco Model Questions Vol1 Economics examination.

Neco Model Questions Vol1 2017 Economics Objective / Multiple Choice Medium Difficulty
Question 47 NECO_MODEL_QUESTIONS_VOL1 • 2017 • ECONOMICS • objective

A savings account pays a nominal interest rate of 12 % per annum, compounded annually. Expected inflation is 8 % in the first year and 5 % in the second year. Determine the real value of the savings after two years relative to today's purchasing power, and compute the average annual real interest rate over the two‑year period.

Answer Options

A. 11.3 % total real gain; average annual real rate ≈ 5.6 %
B. 9.8 % total real gain; average annual real rate ≈ 4.9 %
Correct Answer C. 10.6 % total real gain; average annual real rate ≈ 5.2 %
D. 8.5 % total real gain; average annual real rate ≈ 4.2 %
Correct Answer
C
Correct Option:
10.6 % total real gain; average annual real rate ≈ 5.2 %

About This Question

This is Neco Model Questions Vol1 2017 Economics Question 47. It is one of the objective questions from the 2017 Neco Model Questions Vol1 Economics examination.

Difficulty level: Medium .

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