Question

Initially, Stacy earns a salary of $300 per year and Virginia earns a salary of $200 per year. Stacy lends Virginia $100 for one year at an annual interest rate of 16% with the expectation that the rate of inflation will be 12% during the one-year life of the loan. At the end of the year, Virginia makes good on the loan by paying Stacy $116. Consider an unanticipated decrease in the rate of inflation. The rise in prices and salaries turns out to be 2% over the course of the year rather than 12%. The nominal value of Stacy's salary after one year is

Answer 1

Answer:

The answer is "$306 and $204".

Explanation:

Given value:

Stacy salary = $300

Virginia salary = $200

The nominal value is 2%

Calculating the Stacy salary $= 300 \times \frac{2}{100}$

                                              $= 3 \times 2 \\\\ =6$

$\text{ Stacy salary = slaray+ percent value}$

                    $= \ 300 + \ 6\\\\= \ 306$

Calculating the Virginia salary $= 200 \times \frac{2}{100}$

                                              $= 2 \times 2 \\\\ =4$

$\text{ Virginia salary = slaray+ percent value}$

                        $= \ 200 + \ 4\\\\= \ 204$

Answer 2

The nominal value of Stacy's salary after one year is $204 and $306

Inflation

Given the value is:

Stacy salary = $300, Virg-inia salary = $200 ,The nominal value is 2%

Calculating the Stacy salary = 300*2/100 = 3*2=6

The formula is  Stacy salary= salary + Percent value= $300+$6

Therefore =$306

The Answer is $204 and $306

The term inflation is referred to the devaluation of the currency, and also that not to a rise in the price of goods.

Calculating the Virg-inia salary that is= 200*2/100   = 2*2=4

Virg-inia salary = salary+ percent value

                       = &200 + $4 = $204

Thus, The answer is "$306 and $204".

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