Homework Answers
The answer to the question is a) inflation rate greater than loan rate
This is because after the maturity of loan if inflation is greater than the interest earned. The payoff will be negative. So for example if the loan was of principal 100 and the rate was 6 percent and the inflation rate comes out to be 7percent. The payoff earned would be -1 %
b) b part is incorrect because it reduces the risk if the payment is earlier made.
c and d part doesn't make any sense.
e part is just the opposite of a part so its wrong.
I hope this makes sense.
Please hit the like button.
Took real efforts :)
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