Jack recently took out a loan from Diane at an interest rate of 6 percent. Diane expected this year’s inflation rate to be 3 percent and the real interest rate to be 3 percent. The loan is due at the end of this year. Complete the table below by computing the real interest rate for each possible inflation rate. For each situation, determine whether the unexpected inflation level benefits Jack or Diane.
Instructions: Enter your answers as whole numbers.
Actual inflation rate (%) | Actual real interest rate (%) | Who benefits? |
1 | (Click to select) Jack Diane | |
2 | (Click to select) Jack Diane | |
-1 | (Click to select) Diane Jack | |
-3 | (Click to select) Diane Jack |
Actual inflation rate (%) | Actual real interest rate (%) | Who benefits? |
1 | 5 [i.e., 6 - 1] | Jack |
2 | 4 [i.e., 6 - 2] | Jack |
-1 | 7 [i.e., 6 - (-1)] | Diane |
-3 | 9 [i.e., 6 - (-3)] | Diane |
Actual real interest rate = Nominal interest rate - Actual inflation rate
When Actual real interest rate is less than Nominal interest rate, the borrower benefits.
When Actual real interest rate is greater than Nominal interest rate, the lender benefits.
Jack recently took out a loan from Diane at an interest rate of 6 percent. Diane...
Jack recently took out a loan from Diane at an interest rate of 4 percent. Diane expected this year’s inflation rate to be 3 percent and the real interest rate to be 1 percent. The loan is due at the end of this year. Complete the table below by computing the real interest rate for each possible inflation rate. For each situation, determine whether the unexpected inflation level benefits Jack or Diane. Instructions: Enter your answers as whole numbers. Actual...
You took out a loan with an effective annual interest rate of 15 percent. What is the equivalent semi-annual (6 month) interest rate on this loan? Note: I don't want the APR, I want the EPR (the actual 6 month interest rate). (Click to select) < Prey 29 of 36 $ext > MacBook Air
You took out a loan with an effective annual interest rate of 13 percent. What is the equivalent 18-month interest rate on this loan? Note: I don't want the APR, I want the EPR (the actual interest rate charged over 18 months).
Suppose that the inflation premium is 2 percent and the nominal interest rate is 9 percent. Instructions: Round your answers to the nearest whole number. a. What is the real interest rate? percent b. Given the level of inflation, how many years would it take for the price level to double? years
Suppose that the inflation premium is 2 percent and the nominal interest rate is 9 percent. Instructions: Round your answers to the nearest whole number. a. What is the real interest rate? percent b. Given the level of inflation, how many years would it take for the price level to double? years
If the natural rate of unemployment is 6 percent, what is the actual unemployment rate for this economy (use Okun’s law given Y* = 29,000). Actual unemployment rate: ?? % Conslder the economy described by the following equations: C 1,500 + 8.9 (Y- T) P1808 T1,580 a. Complete the table shown below to find short-run equilibrium output. Conslder possible values for short-run equilibrlum output as they are given In the table below. Instructions: If you are entering any negative...
If the nominal rate on your car loan is 3.95 percent and the rate of inflation is 5.2 percent then the real rate on the loan is negative. Select one: True False Harold goes to the grocery store to buy his month's supply of Coke. As he enters the soft drink section, he notices that the price of Pepsi has been reduced by 25 percent. He buys Pepsi instead of Coke. This represents the substitution bias that is a problem...
Caitlyn took out a $36,000 student loan with a fixed interest rate to pay for college. Caitlyn did not make payments on her loan for a period of 9 years. After this time period interest had accrued, resulting in the loan balance increasing to $63,000. What is is the 9-year growth factor for the amount that Caitlyn owes on the loan? What is the 9-year percent change for the amount that Caitlyn owes on the loan? % What is...
Erica took out a $30,000 student loan with a fixed interest rate to pay for college. Erica did not make payments on her loan for a period of 9 years. After this time period interest had accrued, resulting in the loan balance increasing to $59,000. a. What is is the 9-year growth factor for the amount that Erica owes on the loan? Preview b. What is the 9-year percent change for the amount that Erica owes on the loan? %...
Kayla took a 4-year auto-loan of $20,000. Assume the interest rate is 8 percent per year and the loan agreement calls for fixed principal payment per year. What is the interest payment in year 2?