Homework Answers
Using the formula, we can compute
Real Rate of Return = Nominal Interest rate charge on loan - Rate of anticipated Inflation
10% = Nominal Interest rate charge on loan - 4%
Nominal Interest rate charge on loan = 10% + 4% = 14% or 0.14
Note - Post any doubts/queries in comments section.
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QUESTION 16 Suppose you are thinking of loaning out some money. You would like to get...
Suppose you are thinking of loaning out some money. You would like to get a real...
Suppose you are thinking of loaning out some money. You would like to get a real rate of return of 10% on your loan and the rate of inflation is anticipated to be 4%. What interest rate should you charge on your loan? For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac). Paranranh Arial
help please with all parts 9. Suppose you are a lender and have a real interest...
help please with all parts
9. Suppose you are a lender and have a real interest rate in mind of 5% (or in other words, your required after- inflation rate of retum from making a loan is 5%) and you expect inflation to be 1% over the coming year. Use the approximate Fisher equation to answer this a. What nominal or market interest rate will you charge? Show your calculations en re b. Suppose you lend money at the interest...
Suppose you were borrowing money to buy a car. Consider the following situations. Situation 1: Suppose...
Suppose you were borrowing money to buy a car. Consider the following situations. Situation 1: Suppose the interest rate on your car loan is 17.00 percent and the inflation rate is 16.00 percent. Calculate the real interest rate. 1%. (Enter your response as a percentage rounded to two decimal places.) Situation 2: Suppose the interest rate on your car loan is 7.00 percent and the inflation rate is 4.00 percent. Calculate the real interest rate. 3 %. (Enter your response...
3. Suppose you take out a loan for school this year for $4500. The bank expects that the rate of inflation for next...
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...
Suppose you were borrowing money to buy a car. Consider the following situations. %. (Enter your...
Suppose you were borrowing money to buy a car. Consider the following situations. %. (Enter your Situation 1: Suppose the interest rate on your car loan is 17.00 percent and the inflation rate is 16.00 percent. Calculate the real interest rate. response as a percentage rounded to two decimal places.) %. (Enter your Situation 2: Suppose the interest rate on your car loan is 7.00 percent and the inflation rate is 4.00 percent. Calculate the real interest rate. response as...
Suppose you were borrowing money to buy a car. Consider the following situations. %. (Enter your...
Suppose you were borrowing money to buy a car. Consider the following situations. %. (Enter your Situation 1: Suppose the interest rate on your car loan is 17.00 percent and the inflation rate is 16.00 percent. Calculate the real interest rate. response as a percentage rounded to two decimal places.) %. (Enter your Situation 2: Suppose the interest rate on your car loan is 7.00 percent and the inflation rate is 4.00 percent. Calculate the real interest rate. response as...
Hi I need help on parts E-G. Thank you very much Question 5. Money and Inflation....
Hi I need help on parts E-G. Thank you very much
Question 5. Money and Inflation. The demand for real money is
given by
Y L(Y, i) = Y / ?i
Here Y is real GDP and i is the nominal interest rate measured
in percentage points. The future
inflation ?e is expected to be zero.
(A) Derive an expression for the velocity of money. Comment on
the form of your answer: is velocity
a constant number? If not, why...
Question 1: Inflation and Monetary Policy (12 points out of 20) Here is some data on...
Question 1: Inflation and Monetary Policy
(12 points out of 20)
Here is some data on the economy of a certain country. Use this
data for all three parts of question 1.
M1 Money Supply: $190 Billion
Real GDP: $765 Billion
Velocity of M1 Money Supply: 4.3
Question 1a:
Right now, what is the rate of inflation in that country? How can
you tell?
Type your answer and calculations
here:
Question 1b:
If they want to change the inflation rate...
Suppose, that you put $100 in the bank on January 1, 2017. This time around,
Question 22 Suppose, that you put $100 in the bank on January 1, 2017. This time around, however, the annual nominal interest rate is 6 percent and the inflation rate is 4 percent. Much to your chagrin, the federal government treats interest income like wages and salaries and you have to pay income tax. Suppose you are in the 25% income tax bracket. The real return on your investment, i.e. after you've paid your tax liability isNow, suppose that the nominal interest...
You are looking to get married and buy a house in 5 years. You estimate that...
You are looking to get married and buy a house in 5 years. You estimate that you will need $85,000 in real dollars to buy your house at that time. The nominal return on your investment is 6% and the rate of inflation is 2.1%. Use the Fisher effect to calculate the real rate of return (round to 0.00%). Calculate the amount of money you would need to deposit every year (for the next five years) to achieve your goal...
Suppose you are thinking of loaning out some money. You would like to get a real rate of return of 10% on your loan and the rate of inflation is anticipated to be 4%. What interest rate should you charge on your loan? For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac). Paranranh Arial
help please with all parts
9. Suppose you are a lender and have a real interest rate in mind of 5% (or in other words, your required after- inflation rate of retum from making a loan is 5%) and you expect inflation to be 1% over the coming year. Use the approximate Fisher equation to answer this a. What nominal or market interest rate will you charge? Show your calculations en re b. Suppose you lend money at the interest...
Suppose you were borrowing money to buy a car. Consider the following situations. Situation 1: Suppose the interest rate on your car loan is 17.00 percent and the inflation rate is 16.00 percent. Calculate the real interest rate. 1%. (Enter your response as a percentage rounded to two decimal places.) Situation 2: Suppose the interest rate on your car loan is 7.00 percent and the inflation rate is 4.00 percent. Calculate the real interest rate. 3 %. (Enter your response...
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...
Suppose you were borrowing money to buy a car. Consider the following situations. %. (Enter your Situation 1: Suppose the interest rate on your car loan is 17.00 percent and the inflation rate is 16.00 percent. Calculate the real interest rate. response as a percentage rounded to two decimal places.) %. (Enter your Situation 2: Suppose the interest rate on your car loan is 7.00 percent and the inflation rate is 4.00 percent. Calculate the real interest rate. response as...
Suppose you were borrowing money to buy a car. Consider the following situations. %. (Enter your Situation 1: Suppose the interest rate on your car loan is 17.00 percent and the inflation rate is 16.00 percent. Calculate the real interest rate. response as a percentage rounded to two decimal places.) %. (Enter your Situation 2: Suppose the interest rate on your car loan is 7.00 percent and the inflation rate is 4.00 percent. Calculate the real interest rate. response as...
Hi I need help on parts E-G. Thank you very much
Question 5. Money and Inflation. The demand for real money is
given by
Y L(Y, i) = Y / ?i
Here Y is real GDP and i is the nominal interest rate measured
in percentage points. The future
inflation ?e is expected to be zero.
(A) Derive an expression for the velocity of money. Comment on
the form of your answer: is velocity
a constant number? If not, why...
Question 1: Inflation and Monetary Policy
(12 points out of 20)
Here is some data on the economy of a certain country. Use this
data for all three parts of question 1.
M1 Money Supply: $190 Billion
Real GDP: $765 Billion
Velocity of M1 Money Supply: 4.3
Question 1a:
Right now, what is the rate of inflation in that country? How can
you tell?
Type your answer and calculations
here:
Question 1b:
If they want to change the inflation rate...
Question 22 Suppose, that you put $100 in the bank on January 1, 2017. This time around, however, the annual nominal interest rate is 6 percent and the inflation rate is 4 percent. Much to your chagrin, the federal government treats interest income like wages and salaries and you have to pay income tax. Suppose you are in the 25% income tax bracket. The real return on your investment, i.e. after you've paid your tax liability isNow, suppose that the nominal interest...
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