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Nat2105 [25]
4 years ago
7

Imagine that you borrow $5,000 for one year and at the end of the year you repay the $5,000 plus $600 of interest. If the inflat

ion rate was 4%, what was the real interest rate you paid
Business
1 answer:
SpyIntel [72]4 years ago
4 0

Answer:

8%

Explanation:

Amount borrowed. $5000

Time = one year

Interest paid =$600

Inflation rate =4%

The inflation rate is equivalents to

4/100 x 5000 x 1 year

= 0.04 x 5000

=$200

If nominal interest(interest before inflation) is 600. real interest (interest after adjusting for inflation will be nominal - inflation

=$600 - $200= $400

real interest ratepaid is $400/$5000 x 100

=0.08 x 100

=8%

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Answer:

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3 years ago
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Buying a Home Reading Quiz
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4 years ago
An investor thought that market interest rates were going to decline. He paid $19,000 fora corporate bond with a face value of $
iren2701 [21]

Answer:

$22,251

Explanation:

Coupon rate = $2,000

Now, we calculate the seired sale price of the bonds:

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5 0
3 years ago
Smith Dentistry opened on June 1, 2016. The following transactions occurred during June
Rudiy27

Answer:

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Explanation:

The revenue will be calculated under the accrual basis of accounting which states that a period's revenue should match that period's expenses and these are to be recorded in their respective periods. Under this method, both the cash and the credit sales are recognized as revenue in the period to which they relate. The revenue for the month of June will be as follows,

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5 0
4 years ago
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Aleks [24]

Answer:

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