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Orlov [11]
2 years ago
15

luigi is willing to lend klaus $5,000 for one year at a nominal rate of interest of 7 percent. both luigi and klause expect the

rate of inflation to be 2 percent in the next year. if the actual rate of inflation over the year was 1 percent, what is the real return did luigi receive?
SAT
1 answer:
svet-max [94.6K]2 years ago
4 0

The real return is the difference between the nominal and actual rate of inflation. Therefore, the real return revived by Luigi will be 6%.

<u>Given</u><u> </u><u>the</u><u> </u><u>Parameters</u><u> </u><u>:</u>

  • <em>Nominal rate = 7% </em>

  • <em>Actual rate of inflation = 1%</em>

<em>Real return = Nominal rate - Actual rate of return </em>

Real Return = 7% - 1% = 6%

Therefore, the real return on Luigi's money would be 6%

Learn more : brainly.com/question/18801159

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