You have $675 today which is enough to buy 375 bottles of Diet Pepsi. If the price of Diet Pepsi is expected to increase by 4% over the next year, what approximate nominal rate would you have to earn to be able to buy 400 bottles of Diet Pepsi next Year?

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Business

Deborah Flores

15 December, 02:07

You have $675 today which is enough to buy 375 bottles of Diet Pepsi. If the price of Diet Pepsi is expected to increase by 4% over the next year, what approximate nominal rate would you have to earn to be able to buy 400 bottles of Diet Pepsi next Year?

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Aidan Stevenson · Answer 1

Nominal growth = 10.93%

Explanation:

Giving the following information:

You have $675 today which is enough to buy 375 bottles of Diet Pepsi. The price of Diet Pepsi is expected to increase by 4% over the next year.

First, we need to find the dollar amount necessary to buy 400 bottles:

Unitary cost = 675/375 = $1.8

New unitary cost = 1.8*1.04 = $1.872

Total cost = 400bottles*1.872 = $748.8

Now we can calculate the nominal rate of growth:

r = [ (748.8 - 675) / 675]*100 = 10.93%