76 420
Assignments Done
Successfully Done
In May 2019

Answer to Question #70160 in Macroeconomics for Mely

Question #70160
Suppose I borrowed $100 of principal that must be repaid at the end of two years, along with interest of 4% a year. If the annual inflation rate turns out to be 8%
What is the real rate of interest on the loan?
Expert's answer
r=n-I, where r – real rate of interest, n – nominal rate of interest, i – inflation.
r=4%-8%=- 4%.
It means the real value of the money will have actually decreased, as the real interest rate
would be -4%, after accounting for inflation.

Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!


No comments. Be first!

Leave a comment

Ask Your question

Privacy policy Terms and Conditions