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Mnenie [13.5K]
3 years ago
14

Suppose that a borrower and a lender agree on the nominal interest rate to be paid on a loan. Then inflation turns out to be low

er than they both expected. (1) True or False: The real interest rate on this loan is lower than expected. The lender (2) gains/loses from this unexpected lower inflation, and the borrower (3) gains/loses under these circumstances.
Business
2 answers:
Alla [95]3 years ago
6 0

Answer:

1) False

when the inflation is lower than expected, the real interest rate will be higher, since

real interest rate = Nominal interest rate - inflation.

2) Gains

In case of unexpected lower inflation the lender gains and the borrower loses.This is because real value of the loan increases due to lower inflation.

3) Loses

In case of unexpected lower inflation the lender gains and the borrower loses.This is because real value of the loan increases due to lower inflation.

maxonik [38]3 years ago
4 0

Answer: The real interest rates are lower than expected, the lender loses from the unexpected lower inflation and the borrower gains under these circumstances.

Explanation:

When inflation is higher than was expected, the real interest rate is lower than expected. ... Because the real interest rate is lower than was expected, the lender loses and the borrower gains. The borrower is repaying the loan with dollars that are worth less than was expected.

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Answer:

A. 2 years

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Explanation:

Payback period calculates the amount of time taken to recoup the initial investment made on a project.

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Using the financial calculator to find the NPV:

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Internal rate of return is the discount rate that equates the tax adjusted cash flows from a project to the original amount invested.

Using the financial calculator to find the NPV:

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IRR = 16.46%

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Risk is the major factor to consider when deciding the funding, when funds are provided it is a risk that whether the funds will be received or not.

<h3>What is Risk?</h3>

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There could be a small portion of loss of money or sometimes the debtor completely defaults so not a single penny is retrieved.

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Common stock

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<h3>What is a common stock?</h3>
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<h3>What is the name of common stock?</h3>

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