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.
Question 13 1 pts The nominal interest rate is 26%. The real rate is 8%. What is the inflation rate? O 34.00% O 16.67% O 18.00% 0 36.08% None of the above. 1 pts Question 14 Project ELI's only cash outflow is its cost of $16,000. The project has a net present value NPV of tonno Its profitability index (PVcash inflows PV cash outflows is
Q) Given that for any loan, nominal interest rate (not real interest is charged) is charged, suppose that people expect inflation to equal 3 percent, but in fact prices rise by 5 percent after the loan contract is signed, [Inominal = Ireal + Expected Inflation].To the best of your ability, describe how this unexpectedly high inflation rate would help or hurt the following: a. the government b. a homeowner with a fixed-rate mortgage c. a union worker in the second...
Question 1 1.7 pts Whenever the expected inflation rate is positive The real interest rate is negative O the real interest rate is greater than the nominal interest rate O The nominal interest rate must be equal to the real interest rate The real interest rate is positive O None of the above
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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%....
Attempt 1/8 for 8 pts. Part 1 The nominal interest rate is also called the o quoted interest rate o effective interest rate O real interest rate O inflation-adjusted interest rate BAttempt 1/8 for 8 pts. Part 2 The real rate of interest equals the relative change in purchasing power 0 the nominal interest rate o the nominal interest rate adjusted for inflation the effective annual rate Part 3 The nominai rate of return is 8Attempt 2/8 for 6 pts...