Mgt411 Money and Banking solution

Question 01

Part A

Calculate consumer price index and inflation rate by using following data. (Marks 4)

Years	Cost of Basket	CPI Inflation	Rate
2006	2000	100	n.a
2007	2300	115	15%
2008	2850	142.5	23.91%

Part B

Calculate GDP deflator and inflation rate by using following data. (Marks 4)

Years	Nominal GDP	Real GDP	GDP deflator	Inflation Rate
2006	78000	78000	100.0	n.a
2007	82000	80000	102.5	2.5%
2008	89000	85000	104.7	2.146%

Part C

Which of the following accounts will include in M1 & M2? Identify separately.(Marks 2)

• Euro dollars

• Current account balances in Pakistan

• ATM cards balances in Pakistan

• Banks Saving accounts in Pakistan

• Individual money market mutual fund

• Institutional money market mutual fund share

M1:

• Euro dollars

• Current account balances in Pakistan

• ATM cards balances in Pakistan

M2:

• Individual money market mutual fund

• Banks saving accounts in Pakistan

• Institutional money market mutual fund share

Question 02

Part A

An investor deposits Rs.100,000 today in a bank and bank offers 5% interest rate per annum compounded quarterly. What will be the amount after 10 years? (Marks 5)

Part B

A student needs Rs 200,000 after 5 year for his study. What amount he has to deposit in a bank today so that he will have Rs 200,000 after 5 years if bank offers yearly 6% interest rate compounded semi-annually. (Marks 5)