What was the inflation in the prices faced by consumers

Reference no: EM13688826

Suppose that Jean Splicer, an investor, buys $300,000 of shares of stock in a diversified bundle of Bio-tech firms and exactly one year later sells those shares for $315,000. Assume that the value of the CPI at the date of Jean's purchase was 180 and rose by the sale date one year later to 185 while the value of the GDP Deflator was 120 at the time of her purchase and rose to 125 by the date she sold her shares.

What was Jean’s nominal rate of return on this investment?

What was the inflation in the prices faced by consumers?

What was Jean’s real rate of return on this investment?

Why do we use the CPI, rather than the GDPD, for computing the real return on investment?

Reference no: EM13688826

Questions Cloud

Restaurant contributing to each component of national income : A restaurant with $1 million in annual sales has costs of $350,000 in wages, $450,000 for food, utilities and other supplies, and $100,000 in rent. How much is this restaurant contributing to each component of national income?

A lithium cartels curve : A lithium cartel’s curve is given by P = 2400 – 40Q. Each member’s cost of supplying lithium is AC = MC = $400.

What was the inflation in the prices faced by consumers : Suppose that Jean Splicer, an investor, buys $300,000 of shares of stock in a diversified bundle of Bio-tech firms and exactly one year later sells those shares for $315,000. What was the inflation in the prices faced by consumers?

Homogeneous product with inverse demand function : Two firms compete in a market to sell a homogeneous product with inverse demand function P = 600 - 3Q. Each firm produces at a constant marginal cost of $300 and has no fixed costs.

Price elasticity of demand : Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4 ..

Value of the sample means and what is the standard error : If many random samples of size n = 4 were collected, and in each case the sample mean was calculated, how would these sample means fluctuate? (i.e. what is the expected value of the sample means and what is the standard error?

Consumer spending initially rises : Suppose that the consumer spending initially rises by $5 billion for the very 1 percent rise in household wealth and the investment sending usually rises by $20 billion for every 1 percentage point fall in the real interested rate.

User Account

All Pages