6. A professional golfer goes through a lot of golf balls. She choose to invest her...
6. A professional golfer goes through a lot of golf balls. She
choose to invest her money during the year and buy all her golf
balls at the end of the year. In her current account she has
invested $1,000 which earn 5.5% compounded annually. Inflation is
expected to be 2% per year.
What is the real interest rate for that account?
6. A professional golfer goes through a lot of golf balls. She
choose to invest her money during the year and buy all her golf
balls at the end of the year. In her current account she has
invested $1,000 which earn 5.5% compounded annually. Inflation is
expected to be 2% per year.
What is the real interest rate for that account?
Homework Answers
Real interest rate = Nominal interest rate - Inflation rate
= 5.5% - 2%
= 3.5%
Thus, the real interest rate for that account is 3.5%
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