How does this affect geoff''s incentive to borrow

Assignment Help Macroeconomics
Reference no: EM132482695

Suppose Geoff considers borrowing $100 from Tracey. They both think that a 4 percent real interest rate would be fair, but they are aware of a 30 percent interest income tax. Therefore, they think of the fair 4 percent real interest rate as an after-tax rate. How much should Geoff pay to Tracey in interest, such that the after-tax real interest rate would be 4 percent, if they expect inflation to be 6 percent? What if the expected inflation was 8 percent? How does this affect Geoff's incentive to borrow?

Reference no: EM132482695

Questions Cloud

Compute the ending inventory by the conventional retail : Compute the ending inventory by the conventional retail inventory method. (Round ratios for computational purposes to 0 decimal places)
What is the price of the right : he offer is a three-for-10 pro-rata issue of ordianry shares at $2.60 per share. What is the price of the right? And what is theoretical ex-rights share price
Demand curve and an aggregate demand curve : What is the difference between a microeconomic demand curve and an aggregate demand curve?
Determine the cost per equivalent unit of direct material : Annapolis uses the weighted-average process costing method. Use this information to determine the cost per equivalent unit of direct material for the March
How does this affect geoff''s incentive to borrow : If they expect inflation to be 6 percent? What if the expected inflation was 8 percent? How does this affect Geoff's incentive to borrow?
Determine the cost per equivalent unit of conversion : Annapolis uses the weighted-average process costing method. Use this information to determine the cost per equivalent unit of conversion for the month of March
Prepare an income statement for the accounting period : Prepare a period-end balance sheet for the 2018 accounting period. Prepare a statement of cash flows for the 2018 accounting period.
Compute performance specifications for each aircraft : Compute performance specifications for each aircraft. Assume that the pilot and any passenger(s) that you carry each weigh 180 pounds and carry 20 pounds of bag
Determine the projected ending balance of cash on hand : These amounted to $42,000 in December and $72,000 in January. Use this information to determine the projected ending balance of cash on hand for January

Reviews

Write a Review

Macroeconomics Questions & Answers

  Mcq on mortgage loans and federal reserve bank

The nation is divided into __12______ Federal Reserve districts, each having a Federal Reserve Bank.

  Illustrate what is the elasticity of demand for the product

Illustrate what is the elasticity of demand for the product that is produced by the company.

  Finding quantity demanded from demand equation

A firm has estimated the following demand function for its product: Calculate the advertising elasticity of demand and explain its meaning.

  How the first bank will find its reserves decrease

A commercial bank has excess reserves of $10,000 and a required reserve ratio of 20%. It grants a loan of $8,000 to a customer, who then writes out a check for $8,000 that is deposited in another bank. The first bank will find its reserves decreas..

  Calculate the maintained markup percentage

Calculate the maintained markup percentage for a department under the following conditions

  If the deflation continued for a number of years would the

If the deflation continued for a number of years would the mortgage company benefit? Why or why not? What would happen to the economy as a whole?

  Culture to embrace crisis management

How can an organization change their culture to embrace crisis management? If you were the crisis management team leader, how would you encourage participation of your crisis management team in reviewing and exercising the crisis management plan?

  Assume the marginal external cost mec of oil use is 23bbl

assume the marginal external cost mec of oil use is 23bbl in 2013. assume the mec is linear and is equal to 0bbl when

  Calculate the income elasticity for chocolate

Are chocolate and textbooks complements or substitutes for Jen? b. Calculate the income elasticity for chocolate. Is chocolate a normal good? 2c. Assume we observe the following: Qt = 5; pc = 2; pt = 2.

  If fewer u.s. dollars are needed to buy a swiss franc

If fewer U.S. dollars are needed to buy a Swiss franc, then a.  U.S. residents supply more francs b. U.S. residents buy more Swiss goods

  Establishment of a new milk cooperative

On the basis of this analysis, would you support using government resources to encourage the establishment of a new milk cooperative? Why or why not?

  How investment schedule differ from investment demand curve

What is an investment schedule and how does it differ from an investment demand curve? Defend your views by citing information from the Web and/or your own experiences

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd