How long would it take to double your savings in each of the three accounts? A savings account earning 1% per year: A U.S. Treasury bond earning 3% interest per year and a stock market mutual fund earning 8% interest per year.

Week 5 Homework

• (16 points, 2 per blank and 4 for the last part) Fill in the missing data in the following table.  Use 2013 as the base year.

(4 points) What is the growth rate in nominal GDP between years 2014 and 2015?  What is the growth rate in real GDP between years 2014 and 2015?

• (2 points) A friend is reading a financial blog and wants to know if nominal or real GDP is more important.  Which one do you recommend? In one sentence, explain.
• (9 points, 3 points each) The rule of 72 applies in any growth rate application.  Let’s say you have $1000 in savings in three alternatives. How long would it take to double your savings in each of the three accounts?
  1. A savings account earning 1% per year:
  2. A U.S. Treasury bond earning 3% interest per year.
  3. A stock market mutual fund earning 8% interest per year.