For questions 8 and 9 assume that the equilibrium interest rate is 5%. For different value of expected inflation and actual inflation find the real interest rate and whether wealth is transferred from borrowers to lenders (or vice versa). Em = 3%; 7 = 3.5%
a. 4.5%; benehts borrowers
b. 4.5%; benefits lenders
c. 5.5%; benefits borrowers
d. 5.5%; benefits lenders

Jennifer purchased a house in a brand new development in the outskirts of town. when her house was built, the nearest fire department was nearly 20 miles away. as her neighborhood developed, the density of the community called for a new fire department 1.5 miles away. what effect will the new fire station have on her homeowners insurance premium? a. a new fire department will be more demanding on local taxes. her annual premium will go up. b. the location of a fire department has no bearing on the value of her house. her annual premium will stay the same. c. the new fire department will reduce the risk of financial loss in her home. her annual premium should decrease. d. with a fire department so close (less than 5 miles), financial risk on jennifer’s home practically disappears. she will not need to pay insurance anymore.

Allie and sarah decided that they want to purchase renters insurance for the apartment they share. they made a list of all of the items to be covered by the insurance policy, along with their estimated values. if the items to be covered total more than $3000, the insurance company charges an annual premium of 23% of the total value of the items. if the items to be covered total $3000 or less, the insurance company charges an annual premium of 20% of the total value of the items.

Afamily wishes to save for future college expenses. which financial tool should the family invest in?