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rather than spending $100 on paint today, you decide to save the money until next year, at which point you will use it to paint your room. If the can of paint costs $10 today, how many cans will you be able to buy next year if the nominal interest rate is 21 percent and the expected inflation rate is 10 percent

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anthougo

The number of cans of paint you can buy next year is 11 cans.

Future value and Inflation Rate

To determine the number of cans you can buy next year, the nominal interest rate is used to determine the future value of the $100 saved.  Similarly, the expected inflation rate is used to determine the cost of a can of paint next year.

Data and Calculations:

Amount to be spent on paint today = $100

Cost of a can of paint today = $10

Nominal interest rate = 21%

Expected inflation rate = 10%

Period of savings = 1 year

Future value of $100 in a year's time = $121 ($100 x 1.21)

Expected cost of a can of paint in a year's time = $11 ($10 x 1.1)

Number of cans to buy next year = 11 cans ($121/$11).

Thus, the number of cans of paint you can buy next year is 11 cans instead of 10 cans today.

Learn more about future value at https://brainly.com/question/24703884

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