A borrower and a lender agree on a mortgage interest rate. If inflation turns out to...
A borrower and a lender agree on a mortgage interest rate. If inflation turns out to be less than expected
A. the actual real interest rate will be less than the expected real interest rate. B. the actual nominal interest rate will be higher than expected. C. the actual nominal interest rate will be less than expected. D. the actual real interest rate will exceed the expected real interest rate.
Homework Answers
D is true
Since the inflation rate is lesser than expected real rate will be higher than expected. This is because a nominal rate has been decided and the real rate= Nominal rate - inflation. Hence the expected real rate will be lower than the actual real rate.
Add Answer to:
A borrower and a lender agree on a mortgage interest rate. If inflation turns out to...
9. Suppose that a borrower and a lender agree on the nominal interest rate to be...
9. Suppose that a borrower and a lender agree on the nominal interest rate to be paid on a loan. Then infla- tion turns out to be higher than they both expected. a. Is the real interest rate on this loan higher or lower than expected? b. Does the lender gain or lose from this unexpectedly high inflation? Does the borrower c. Inflation during the 1970s was much higher than most people had expected when the decade began. How did...
Suppose that the inflation rate turns out to be much higher than most people expected. In...
Suppose that the inflation rate turns out to be much higher than most people expected. In that case, O A. both borrower and lender will gain from the situation. O B. a borrower will gain from the situation while a lender will lose. O C. a lender will gain from the situation while a borrower will lose. D. both borrower and lender will lose in this situation
If a lender charge a 9% nominal interest rate and expected inflation rate is a 4%,...
If a lender charge a 9% nominal interest rate and expected inflation rate is a 4%, what is the difference between the real rate the lender received and the real rate the lender expected when the actual inflation ended up being 2%
Suppose that a lender's desired real rate of interest is 2%, the expected rate of inflation...
Suppose that a lender's desired real rate of interest is 2%, the expected rate of inflation is 2% and the actual rate of inflation is 4%: a) What's the nominal rate of interest? b. What's the actual rate real rate of interest? Explain who benefits from expectations error--the lender or the borrower.
Suppose the nominal interest rate equals 9%, the expected inflation rate is 5%, and actual inflation...
Suppose the nominal interest rate equals 9%, the expected inflation rate is 5%, and actual inflation turns out to be 3%. In this case, the: a. ex ante real interest rate is 4%. b. ex post real interest rate is 4%. C. ex ante real interest rate is 6%. d. ex post real interest rate is 2%
10. Consider the situations of a lender of money and a borrower of money. Which of...
10. Consider the situations of a lender of money and a borrower of money. Which of the following situations is least burdensome for the borrower? a. nominal interest rate of 15% and an inflation rate of 8% b. nominal interest rate of 10% and an inflation rate of 1% c. nominal interest rate of 8% and an inflation rate of 2% d. nominal interest rate of 4% and an inflation rate of 4% e. nominal interest rate of 29% and...
Given the nominal interest rate of 18% and the expected inflation of 15% then the value...
Given the nominal interest rate of 18% and the expected inflation of 15% then the value of the real interest rate %. With the real interest rate equal to 3% and the expected flat on equal to 4%, then the value of the nominal interest rate is A lender prefers a real interest rate while a borrower prefers a % real interest rate
If actual inflation is smaller than expected inflation, would lender and borrower lose or benefit from...
If actual inflation is smaller than expected inflation, would lender and borrower lose or benefit from this unexpected change?
With a fixed-rate mortgage (FRM), the ___________ bears the interest rate risk and with an Adjustable...
With a fixed-rate mortgage (FRM), the ___________ bears the interest rate risk and with an Adjustable Rate Mortgage (ARM) the __________ bears the interest rate risk. A. borrower; lender B. lender; lender C. borrower; borrower D. lender; borrower
4. What is the value of the real interest rate in each of the following situations?...
4. What is the value of the real interest rate in each of the following situations? a. The nominal interest rate is 15%, and the expected inflation rate is 13%. b. The nominal interest rate is 12%, and the expected inflation rate is 9%. c. The nominal interest rate is 10%, and the expected inflation rate is 9%. d. The nominal interest rate is 5%, and the expected inflation rate is 1%. e. In which of the above situations would...
9. Suppose that a borrower and a lender agree on the nominal interest rate to be paid on a loan. Then infla- tion turns out to be higher than they both expected. a. Is the real interest rate on this loan higher or lower than expected? b. Does the lender gain or lose from this unexpectedly high inflation? Does the borrower c. Inflation during the 1970s was much higher than most people had expected when the decade began. How did...
Suppose that the inflation rate turns out to be much higher than most people expected. In that case, O A. both borrower and lender will gain from the situation. O B. a borrower will gain from the situation while a lender will lose. O C. a lender will gain from the situation while a borrower will lose. D. both borrower and lender will lose in this situation
Suppose the nominal interest rate equals 9%, the expected inflation rate is 5%, and actual inflation turns out to be 3%. In this case, the: a. ex ante real interest rate is 4%. b. ex post real interest rate is 4%. C. ex ante real interest rate is 6%. d. ex post real interest rate is 2%
10. Consider the situations of a lender of money and a borrower of money. Which of the following situations is least burdensome for the borrower? a. nominal interest rate of 15% and an inflation rate of 8% b. nominal interest rate of 10% and an inflation rate of 1% c. nominal interest rate of 8% and an inflation rate of 2% d. nominal interest rate of 4% and an inflation rate of 4% e. nominal interest rate of 29% and...
Given the nominal interest rate of 18% and the expected inflation of 15% then the value of the real interest rate %. With the real interest rate equal to 3% and the expected flat on equal to 4%, then the value of the nominal interest rate is A lender prefers a real interest rate while a borrower prefers a % real interest rate
4. What is the value of the real interest rate in each of the following situations? a. The nominal interest rate is 15%, and the expected inflation rate is 13%. b. The nominal interest rate is 12%, and the expected inflation rate is 9%. c. The nominal interest rate is 10%, and the expected inflation rate is 9%. d. The nominal interest rate is 5%, and the expected inflation rate is 1%. e. In which of the above situations would...
Most questions answered within 3 hours.
-
Where is the error in this code sequence?
String s1 = "Hello";
String s2 = "ello";...
asked 10 months ago -
Financial data for Joel de Paris, Inc., for last year
follow:
Joel de Paris, Inc.
Balance...
asked 10 months ago -
Consider this reaction:
Al2(SO4)3 (aq)+ BaCl3
(aq) Al2Cl6 (aq)- +
3BaSO4(s) . What is the...
asked 10 months ago -
Suppose that Savneet is considering increasing her
recent random sample from 20 car rentals to 40...
asked 10 months ago -
Trucks arrive at an unloading terminal at an average rate of 120
per hour.
Trucks arrive...
asked 10 months ago -
Why are methanol and ethanol completely soluble in water while
octanol is not very little soluble....
asked 10 months ago -
A facilities manager at a university reads in a research report
that the mean amount of...
asked 10 months ago -
When the CuSO4 is rehydrated by adding water to the anhydrous
compound, is this an endothermic...
asked 10 months ago -
A ray of sunlight is passing from diamond into crown glass; the
angle of incidence is...
asked 10 months ago -
A block of mass 0.249 kg is placed on top of a light, vertical
spring of...
asked 10 months ago -
how do the kidneys compensate in the presences of acidosis
a) trigger hyperventilate
b) reserve acid...
asked 10 months ago -
Question 501 pts
The rental rate of capital to the firm increases. Which of the
following...
asked 10 months ago