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Imagine you get approved for a one-year fixed interest rate loan with BB&T. The interest rate...

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

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Answer #1

Does this news affect the real cost of your loan? Yes
Real cost of loan = interest rate - inflation
How about BB&T? Are the bank real returns affected by this news? Yes
The real return for BB&T will reduce and bank real returns are affected by the news

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