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Interest rate risk for borrowers as well as lenders

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Reference no: EM133082142

The Fisher Model for interest rates: o Two ways to express the equation (approximation & and the correct method based on compounding or rates): Nominal interest rate = real interest rate + expected inflation i = r + expected inflation o If expected inflation increases nominal interest rates will increase. This gives rise to interest rate risk for borrowers as well as lenders.

Reference no: EM133082142

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