Question

Suppose Dalia is a fashionista and buys only denim jackets. Dalia deposits $3,000 into a savings account that pays an annual nominal interest rate of 5%. Assume this interest rate is fixed, and so it will not change over time. On the day she makes her deposit, suppose that a denim jacket has a price of $15.00.

a. Initially, Dalia's $3,000 deposit has a purchasing power of_____ denim jackets.

Answer 1

Initially, Dalia's deposit of $3,000 has a purchasing power of 200 denim jackets, calculated by dividing the total deposit by the price of one jacket.

Step-by-step explanation:

If Dalia deposits $3,000 into a savings account with an annual nominal interest rate of 5%, and the price of a denim jacket is $15.00, we can calculate her initial purchasing power in terms of denim jackets. To find out how many jackets she can buy initially, we divide her total deposit by the price of one jacket.

Purchasing Power = Total Deposit / Price of One Jacket

Purchasing Power = $3,000 / $15.00

Purchasing Power = 200 Jackets

Therefore, initially, Dalia's $3,000 deposit has a purchasing power of 200 denim jackets.

It's important to note that this calculation does not take into account the effect of interest on her savings over time, as it focuses on her initial purchasing power.