What is the actual real interest rate on the loan

Reference no: EM13181160

I lend you a $1,000 today and you agree to pay me $1,100 one year from today. You are going to buy a computer with the $1,000 that your borrow from me. You anticipate that if you wait a year to buy the computer, its price will rise to $1,070. What is the nominal interest rate on this loan? What is the usual inflation rate? What real interest rate do the lender and borrower anticipate? Assume that the computer really costs $1,020 at the end of the year. What is the actual real interest rate on the loan? Would you have been less likely or extra likely to borrow the money if they had known the true inflation rate? Who was hurt by the fact that the actual inflation was not equal to the expected inflation rate, the lender or the borrower?

Reference no: EM13181160

Questions Cloud

What is the speed of the plane in still air : A plane flies 420 miles with the wind and 310 miles against the wind in the same length of time. If the speed of the wind is 22 mph, what is the speed of the plane in still air?

What is the height of the cuboid : An iron cube of side 6cm is melted and recast into a cuboid which has a square base of side 4cm as shown below. What is the height of the cuboid?

Find out the rate of consumption of o : Determine the rat of consumption of O2 if the initial concentration of NH3 was 0.6719 M and decreased to 0.5827 M after 0.3883 hours

What would be the co-ordinates of its image : If the point A (3,4) is translated by the column vector (2,-5), what would be the co-ordinates of its image?

What is the actual real interest rate on the loan : Would you have been less likely or extra likely to borrow the money if they had known the true inflation rate? Who was hurt by the fact that the actual inflation was not equal to the expected inflation rate, the lender or the borrower?

Compute the minimum amount of triphenylmethanol : Calculate the minimum amount of triphenylmethanol required to prepare 10.0kg of triphenylmethyl methyl ether.

How to determine which lipid has more polarity than other : A mixture containing the lipids listed below is separated using a silica gel column and washing with increasingly polar solvents. Rank the lipids in order of elution from the column.

What is the case in favor of fed independence : What factors explain the high degree of independence of the Fed? 5. What factors limit the independence of the Fed? 6. What is the case in favor of Fed independence? What is the case against Fed independence? 7. What is the theory of bureaucratic beh..

Depth exploration of human resilience : Develop a social policy recommendation that would promote resilience in the at-risk population you have identified in your research. Develop a rationale for your recommendation by referring to the research papers you have located, as well as to th..

User Account

All Pages