Apps. and Interpretation for IBDP Maths Ebook 1 | Page 91

3. An amount of money $2800 is invested for 12 years at a nominal annual interest rate of
4%, compounded yearly. After the rate of inflation is considered, the real value of amount
of money after 12 years is $4000.
(a)
(b)
Find the value of the real interest rate per year.
Find the rate of inflation per year.
[3]
[2]
4. Debby invested 14500 USD in an account that pays a nominal annual interest rate of
9.2%, compounded quarterly. This amount is invested for 8 years and the inflation rate in
these 8 years is i % .
(a) Find the real interest rate per year, giving the answer in terms of i and correct to 4
decimal places.
[4]
It is given that the real value of amount of money after 8 years is 18500 USD.
(b) Using the answer in (a), find the value of i .
[3]
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