a. Real interest rate = nominal interest rate - inflation
= 7% - 2.5%
= 4.5%
b. Value of deposit = 12000 * (1+0.07) = 12000 * 1.07 = 12840
c. Real purchasing power = 12000 * (1+0.045) = 12000 * 1.045 = 12540
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