Question

In: Economics

2. Suppose that you have $250 to invest. a. You decide to store the $250 cash...

2. Suppose that you have $250 to invest.

a. You decide to store the $250 cash under your mattress. If inflation is 3%, what will be the real value of that cash after one year under the mattress?
b. If the nominal interest rate for a typical savings account is 1%, how much would the $250 be worth if you kept it in a savings account for 1 year?
c. How much money did you lose by not depositing the money at the bank?
d. Should you ever store your money under the mattress?

Solutions

Expert Solution

Part (C)

Person loses $9.782 by not depositing money in the savings account of bank

Part (D)

one should never store money under the mattress because storing money reduces value of money

Rahul Sunny answered 2 years ago
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