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johnpaul92 johnpaul92
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8 years ago
Loretta agrees to lend Ted $500,000 to buy computers for his consulting firm. They agree to a nominal interest rate of 8%. Both expect the inflation rate to be 2%.
(a)   Calculate the expected real interest rate.
(b)   If inflation turns out to be 3% over the life of the loan, what is the real interest rate? Who gains from unexpectedly high inflation, Loretta or Ted?
(c)   If inflation turns out to be 1% over the life of the loan, what is the real interest rate? Who gains from unexpectedly low inflation, Loretta or Ted?
Textbook 
Macroeconomics

Macroeconomics


Edition: 8th
Authors:
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supamansupaman
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johnpaul92 Author
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#2
8 years ago
This is incredible, wasn't expecting anyone to answer this one
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#3
3 years ago
amazing
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#4
3 years ago
thanks
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#5
3 years ago
awesome
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#6
3 years ago
thank you
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