1. Your dream home costs $2,000,000 today and will appreciate 2% per year over the next 10 years. How much money do you have to put in your bank account today so that you’ll be able to buy your dream home in 10 years? Your bank account pays 6% nominal interest per year.?
2. You have put your money into a bank that gives you 5% (nominal) interest per year. If the general level of prices goes up by 2% every year, what is the real interest rate on your bank account?