(10) Refer to the \"In the News\" below: In the News: College Tuition Up Again C
ID: 1228373 • Letter: #
Question
(10) Refer to the "In the News" below:
In the News: College Tuition Up Again
College gets more expensive – again. Tuition at public four-year colleges rose 2.9 percent this year, to an average of $8,893 per year. Out-of-state students pay an average of $22,203 to attend.
Private four-year colleges also saw tuition increases of 2.9 percent – to an average of $30,094. These tuition hikes come on the heels of a 4.5 percent jump in 2012-13 and 8.5 percent in 2011-12. Tuition prices have been outpacing general inflation rates for many years.
Source: The College Board
If tuition for private four-year colleges was $10,000 in 2010-2011, how much was it in:
Instructions: Round to the nearest two decimal places.
(a) 2011-12?
$
(b) 2012-13?
$
(c) 2013-14?
$
(11) On the accompanying graph, illustrate the real interest rate (adjusted for same-year CPI inflation) for each year.
Instructions: Use the given data to calculate the Real Interest Rate for each year.
Year
Nominal Interest Rate
CPI Inflation Rate
Real Interest Rate
2000
9.2
3.4
2001
6.9
2.8
2002
4.7
1.6
2003
4.1
2.6
2004
4.3
2.7
2005
6.2
3.4
2006
8.0
3.2
2007
8.1
2.8
2008
5.1
3.8
2009
3.3
-0.4
2010
3.3
1.6
2011
3.3
3.2
2012
3.3
2.1
2013
3.3
1.5
Instructions:
1. Use the line tool (Real Interest Rate) to plot the real interest rate using the data in the table above.
2. To earn full credit for this graph, you must plot all 14 points for each curve.
(a) In what year(s) was the official goal of price stability met?
(b) In what year was the inflation rate lowest?
(c) What was the range of (i) nominal and (ii) real interest rates for the years 2000 to 2013?
(i)
(ii)
(d) On a year-to-year basis, which varies more—nominal or real interest rates?
In the News: College Tuition Up Again
College gets more expensive – again. Tuition at public four-year colleges rose 2.9 percent this year, to an average of $8,893 per year. Out-of-state students pay an average of $22,203 to attend.
Private four-year colleges also saw tuition increases of 2.9 percent – to an average of $30,094. These tuition hikes come on the heels of a 4.5 percent jump in 2012-13 and 8.5 percent in 2011-12. Tuition prices have been outpacing general inflation rates for many years.
Source: The College Board
Explanation / Answer
Question 10
Tuition for private four-year college in 2010-2011 = $10,000
(a) Calculate tuition for private four-year colleg in 2011-2012 -
Increase in tuition cost in 2011-2012 = 8.5%
Amount of increase = Tuition cost in 2010-2011 * 8.5%
= $10,000 * (8.5/100)
= $850
Tuition in 2011-2012 = Tuition in 2010-2011 + Increase in 2011-2012
= $10,000 + $850
= $10,850
The tuition for private four-year college in 2011-2012 is $10,850.
(b) Calculate tuition for private four-year colleg in 2012-2013 -
Increase in tuition cost in 2012-2013 = 4.5%
Amount of increase = Tuition cost in 2011-2012 * 4.5%
= $10,850 * (4.5/100)
= $488.25
Tuition in 2012-2013 = Tuition in 2011-2012 + Increase in 2012-2013
= $10,850 + $488.25
= $11,338.25
The tuition for private four-year college in 2012-2013 is $11,338.25.
(c) Calculate tuition for private four-year colleg in 2013-2014 -
Increase in tuition cost in 2013-2014 = 2.9%
Amount of increase = Tuition cost in 2012-2013 * 2.9%
= $11,338.25 * (2.9/100)
= $328.81
Tuition in 2013-2014 = Tuition in 2012-2013 + Increase in 2013-2014
= $11,338.25 + $328.81
= $11,667.06
The tuition for private four-year college in 2013-2014 is $11,667.06.
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