Question

Your savings account pays 13 percent per​ year: Each​ $100 in the bank grows to ​$113 over a​ one-year period. If prices increase by 8 percent per​ year, by keeping​ $100 in the bank for a year you actually gain ______________.

Answer 1

4.63% per year

Explanation:

At the beginning of the year, you had $100 that would purchase 1.0000 of an object whose price was $100.

At the end of the year, your $100 increased to $113, and the price of the object increased by 8% to $108. You can now buy ...

$113/$108 ≈ 1.0463

of those objects. You actually gained about 4.63% above the rate of inflation.