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Bank in the loans department

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Reference no: EM131243128

You have just taken a job at a bank in the loans department. Your bank is worried about the current economic climate and the potential to limit the real rate of interest they will earn on new loans. Turning to you, the head of the department asks you to determine the proper nominal rate of interest to ensure a 5% real rate of interest. You say that you have to know what inflation will be. You are told that the current inflation rate is 1%.

Reference no: EM131243128

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