One year ago you put $500 into a newly opened savings account
earning 4 percent interest. On that day the consumer price index
was 120. Today, the same consumer price index is 132.
1. The realized real rate of interest on your savings
account was -2.0 percent.
2. $52 would have been sufficient to compensate you for
the increase in prices that occurred during the year.
3. If the savings account had been indexed by the local CPI
you would have about $572 in your account instead of the $520 you now have.
4. All of the above statements are true.
Choose the correct option.