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VMariaS [17]
2 years ago
15

You lend​ $5,000 to a friend for one year at a nominal interest rate of​ 10%. Inflation during that year is​ 5%. As a​ result, y

ou will receive​ ________ at the end of the​ year, but that money has a purchasing power of​ ________.
Business
2 answers:
sukhopar [10]2 years ago
6 0

Answer:

$500, $250

Explanation:

You lend​ $5,000 to a friend for one year at a nominal interest rate of​ 10%. Inflation during that year is​ 5%. As a​ result, you will receive​ $<u>500</u> at the end of the​ year, but that money has a purchasing power of​ $<u>250</u>.

The nominal rate determines the amount that will received which is 10% of $5000 = $500

However the real rate determines the purchasing power of the amount to be received which is: Nominal rate - Inflation rate = Real rate,

Therefore the real rate = 10% - 5% = 5%

5% x 1000 = $250

Inflation is the single major factor that affects the purchasing power of money, hence the inflation effect must always be subtracted from any returns lenders are expecting, to get their real returns.

jarptica [38.1K]2 years ago
6 0

Answer:

As a​ result, you will receive​ <u>$5,500</u> at the end of the​ year, but that money has a purchasing power of​ <u>$5,238</u>.

Explanation:

At the end of the year, you will receive $5,000 x (1 + 10%) = $5,000 x 1.1 = $5,500. That is basically the future value of your money.

But in order to determine the purchasing power of that money, we must determine its present value using the inflation rte as our discount rate:

present value = future value / (1 + r) = $5,500 / 1.05 = $5,238.10 ≈ $5,238

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<h3 /><h3>What is market culture?</h3>

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Find out more about organizational culture here:

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Central banks are responsible for the collection and the replacement of currency from circulation.
Dmitriy789 [7]

Answer:

The correct answer is letter "A": True.

Explanation:

Central banks are the financial institutions in charge of the monetary policy of their country on behalf of the central government. They regulate the money supply and the interest rates to maintain a country's economy the closest to its equilibrium level. In the United States, the central bank is the Federal Reserve (<em>Fed</em>). Central banks also collect and replace the currency in circulation.

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Since Professor Muhammad Yunus founded Grameen Bank in 1976, several economists have analyzed the Grameen Bank's success in trying to eradicate poverty in Bangladesh, either theoretically or empirically. He used social incentives through group responsibility to maximize loan repayment rates and created an incentive for other banks to offer similar loans to the poor.

Social incentives refer to a wide variety of interpersonal motivations and rewards that encourage people to act in a socially valued and approved manner. Projecting a positive reputation and social image, obtaining social acceptance, and moving up the social hierarchy are all examples of social incentives.

To learn more about social incentives :brainly.com/question/3579101

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