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777dan777 [17]
3 years ago
14

Last year both a borrower and a lender expected an inflation rate of 3 percent when they signed a long-term loan agreement with

fixed nominal interest rates of 5 percent. If the actual inflation rate were lower than expected, then which of the following would be true?A. The borrower would benefit.B. The lender would benefit.C. The real interest rate would be lower than expected.D. The nominal interest rate would be higher than expected.
Business
2 answers:
aleksandrvk [35]3 years ago
7 0

Answer:

A. The borrower will benefit

Explanation:

The borrower benefits in the sense that the anticipated margin that took a 3% inflation rate into consideration will be smaller than the actual margin when the loan is repaid due to the prevailing inflation rate being smaller than anticipated. In simple English, the value of money the borrower gets at the time of repayment is higher than what was anticipated based on the expected inflation rates

valentina_108 [34]3 years ago
4 0

Answer:

B. The lender would benefit.

Explanation:

Based on the information provided within the question it can be said that in this scenario the one who would benefit from a lower inflation rate would be the lender. That is because by there being a lower inflation rate it means that the money that the borrower needs to pay back the loan does not have the buying power he predicted it would have when he borrowed it. Meaning that he would need to pay more money to the lender than originally anticipated.

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Answer:

a. Overstates Inflation.

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b. Understated Inflation

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c. Overstates Inflation

In the case of Zach, the inflation will be overstated because Zach is no longer buying bagels and is now buying muffins so continuing to use bagels as a representative good in the basket of goods used to calculate CPI would be overstating it.

d. Accurate representation of Inflation

In Chris's case, the increase in the price of the same shoe over the years has been because of a general rise in prices and not because it is a different model. It is the same shoe and its price is rising generally so this is an accurate depiction of inflation.

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If Nike had signed a release not to sue Already for past violations of trademarks, in exchange for some money, would this case l
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Answer:

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