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vekshin1
2 years ago
12

Suppose Sally borrows $1,000 from Harry for one year and agrees to pay a nominal interest rate of 9%. When she borrows the money

, both she and Harry expect an inflation rate of 6%. 1st attempt Part 1 (0.3 point)See Hint The expected real interest rate on the loan is %. Part 2 (0.3 point)See Hint Suppose that when Sally pays back the loan after one year, the actual inflation rate turns out to be 7%. The actual real interest rate on
Business
1 answer:
Lilit [14]2 years ago
3 0

Answer:

Instructions are listed below

Explanation:

Giving the following information:

Suppose Sally borrows $1,000 from Harry for one year and agrees to pay a nominal interest rate of 9%. When she borrows the money, both she and Harry expect an inflation rate of 6%. Suppose that when Sally pays back the loan after one year, the actual inflation rate turns out to be 7%.

Real rate= nominal rate - inflation rate

At the beginning of the loan, the expected real rate is:

Real rate= 9 - 6= 3%

The actual rate is:

Real rate= 9 - 7= 2%

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