What nominal rate should they charge borrowers

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Recently, the average rate paid by banks on savings accounts was 0.45%. However, at the same time, inflation was around 1.50% what was the average saver’s real rate of interest on his/her earnings? (b) Banks expect that the rate of inflation in the coming year will be 3%. They want a real return of 5%. What nominal rate should they charge borrowers? Explain in complete sentences.

Reference no: EM13831232

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