Real value of the payment after tax

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You have just taken out a loan of NOK 1 million. The loan is a fixed-rate loan (serial loan) over 20 years with a real interest rate before tax of 4%. The nominal borrowing rate before tax must be adjusted in line with the expected price increase. Assume a price increase of 0% and 3%, respectively.

How much lower is the real value of the payment after tax in the last year (the 20th year) at a price increase during the period of 3% compared to a price increase of 0%?

Reference no: EM133003891

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