Problem:

Money is invested in a savings account with a nominal interest rate of 2.4% convertible monthly for three years. The rate of inflation is 1.5% for the first year, 2.8% for the second year, and 3.4% for the third year.

Required:

Find the percentage of purchasing power lost during the time the money is invested; that is, find p so that if you could purchase exactly u units at the time the money was invested, three years later you could purchase u(1-.01p).

Please show all calculations