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What is the real interest rate

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Suppose you borrow 5 apples and promise to return 6 apples a year later. The current apple price is $2/apple. You and the lender expect the price would increase to $2.1/apple.

1. What is the real interest rate?

2. What is the expected inflation rate?

3. Instead of apples, if you borrow cash, how much do you borrow and payback?

4. What is the nominal interest rate?

Reference no: EM133069871

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