1. What is the EAR if the APR is 6% and compounding is quarterly?
2. For a nominal interest rate of 10% and inflation of 3%, according to the Fisher Effect, what would be the approximate real rate?
3. You would liike to increase your purchasing power next year by about 4%. If you expect prices to increase at a rate of 2% over the next year, what approximate increase would you need in your salary in order to achieve your desired increase in purchasing power?
4. You have $675 today which is enough to buy 375 bottles of Diet Pepsi. If the price of Diet Pepsi is expected to increase by 4% over the next year, what approximate nominal rate would you have to earn to be able to buy 400 bottles of Diet Pepsi next Year?