Answer:
6%
Explanation:
Real interest Rate= Nominal interest rate-Inflation
=10%-4%
=6%.
।। IVIS Question 3 0.4 pts If the rate of interest on a one-year loan contract...
3. Suppose you take out a loan for school this year for $4500. The bank expects that the rate of inflation for next year will equal 2%. You and the bank agree that in one year's time, you will pay back the full amount at an interest rate of 6%. Next year though, there is a sudden rise in inflation, causing inflation to equals 7%. a. How much will you pay back in one year? b. What is the anticipated...
Question 58 (1 point) Saved Suppose the nominal annual interest rate on a two year loan is 16 percent and lenders expect inflation to be 10 percent in each of the two years. The annual real rate of interest is: 6 percent. 12 percent. 4 percent 16 percent
A lender and a borrower signed a contract for a $1,000 loan for one year. The lender asked the borrower to pay 3% interest. Inflation occurred and prices rose by 2% over the next year. At the end of the year, the borrower repaid $1,030 (principal + interest). What is the amount worth in real terms (i.e., after inflation)? $1,060.90. $1,050.60. $1,029.41. $1,009.80.
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#13 What is the expected one-year interest rate on a 1-year 1-Bill in four years? 12. YOP, Inc has a 3-year outstanding bond with 13% yield. Investors expect to earn an average of 3% in real rate of return. Inflation is expected to be 1.5%, 2.0% and 4% for the next 3 years. Its lack of popularity in the financial market requires it to pay 2.5% for its lack of liquidity, and its relatively short amount of time before maturity...
Imagine you get approved for a one-year fixed interest rate loan with BB&T. The interest rate of this loan is based on an expected inflation of 2%. However, one year later, the inflation rate increased to 3.5%. Does this news affect the real cost of your loan? How about BB&T? Are the bank real returns affected by this news? Essay Toolbar navigation More info
2.You borrowed $1,500 for one year, and agreed to pay back $1,680. At the outset you expected the inflation rate to be 2% over the period of the loan, but it ended at 4%. In this case, Question options: the nominal interest rate was 1.12%, the expected real interest rate was 2%, the actual real interest rate ended at 4%. the nominal interest rate was 12%, the expected real interest rate was 14%, the actual real interest rate was 16%....
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