36. What is the real interest rate if the nominal interest rate is 9% per year and the rate of inflation is 6% per year?a) 1.5%b) 2.75%c) 2.83%d) 7.5%Answer: (c) 37. What is the nominal interest rate if the real rate of interest is 4.5% and the rate of inflation is 6% per year?a) 10.5%b) 10.77%c) 10.86%d) 14.5%Answer: (b)38. What is the real rate of interest if the inflation rate is 6% per year and the nominal interest rate per year is 12.5%?a) 1.32%b) 6.13%c) 5.78%d) 11.79%Answer: (b)39. Compute the real future value, to the nearest dollar, of $2,000 in 35 years time. The real interest rate is 3.2%, the nominal interest rate is 8.36%, and the rate of inflation is 5%.a) $6,023b) $6,853c) $33,223d) $11,032Answer: (a) 40. The real interest rate is 3.2%, the nominal interest rate is 8.36% and the rate of inflation is 5%. We are interested in determining the future value of $200 in 35 years time. What is the future price level?a) 2.91b) 3.012c) 5.516d) 16.61Answer: (c)41. Suppose your child is 9 years old and you are planning to open a fund to provide for the child’s college education. Currently, tuition for one year of college is $22,000. How much must you invest now in order to pay enough for the first year of college nine years from now, if you think you can earn a rate of interest that is 4% more than the inflation rate?a) $21,154b) $16,988c) $15,585d) $15,457Answer: (d)42. Suppose you have a child who is 10 years old and you are planning to open a fund to provide for the child’s college education. Currently, tuition for one year is $22,000. Your child is planning to travel for two years before starting college. How much must you invest now in order to pay enough for the first year of college ten years from now, if you think you can earn a rate of interest that is 5% more than the inflation rate?a) $10,190b) $13,506c) $13,660d) $20,952Answer: (b)43. When considering a plan for long run savings, if one does not have an explicit forecast of inflation, then one can make plans in terms of:a) constant real payments and a real rate of interestb) constant nominal payments and a nominal rate of interestc) constant real payments and a nominal rate of interestd) constant nominal payments and a real rate of interestAnswer: (a)