Question

Suppose Frances is an avid reader and buys only mystery novels. Frances deposits $3,000 in a bank account that pays an annual nominal interest rate of 15%. Assume this interest rate is fixed—that is, it won't change over time. At the time of her deposit, a mystery novel is priced at $15.00.

Initially, the purchasing power of Frances's $3,000 deposit is _______ mystery novels

Answer 1

Initially, the purchasing power of Frances's $3,000 deposit is 200 mystery novels

Step-by-step explanation:

The initial purchasing power is the number of mystery novels that the initial deposit of $3,000 can buy at the price of $15 per mystery novel.

Purchasing power=deposit amount/price per mystery novel

purchasing power=$3000/$15

purchasing power=200 mystery novels