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Suppose a borrower and lender agree on the nominal interest rate to be paid on a loan and the inflation turns out to be higher than they expected Is the real interest rate on this loan higher?
Wiki User
∙ 12y ago
the real interest rate equals nominal interest rate minus inflation rate. In the situation the inflation rate increase and the nominal interest rate remains unchanged, therefore the real interest rate must decrease.
Wiki User
∙ 12y ago
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Suppose that inflation is -3 per year and it is expected to continue at that rate in the future If the nominal interest rate is 0 per year then what is the real interest rate?
-3
Suppose you place 10000 in a retirement fund that earns a nominal interest rate of 8 percent If you expect inflation to be 5 percent or lower then you are expecting to earn a real interest rate of?
3 percent
What are the methods for accounting inflation?
Discuss the various methods of inflation accounting.
Is inflation harmful?
Too much inflation will ruin the economy but small levels of inflation will spur growth. Inflation is very harmful to any economy because it can ruin the economy's development and growth and this is not suppose to be. Inflation is also very harmful to any economy because the people living in that economy might not survive the situation and this is when you see that an economy is affected and if nothing is done to it, it can cause an economy to collapse.
What positive effects of inflation can be listed?
It can benefit the inflators (those responsible for the inflation)It be benefit early and first recipients of the inflated money (because the negative effects of inflation are not there yet).It can benefit the cartels (it benefits big cartels, destroys small sellers, and can cause price control set by the cartels for their own benefits).It might relatively benefit borrowers who will have to pay the same amount of money they borrowed (+ fixed interests), but the inflation could be higher than the interests, therefore they will be paying less money back. (example, you borrowed $1000 in 2005 with a 5% fixed interest rate and you paid it back in full in 2007, let's suppose the inflation rate for 2005, 2006 and 2007 has been 15%, you were charged %5 of interests, but in reality, you were earning %10 of interests, because 15% (inflation rate) -- 5% (interests) = %10 profit, which means you have paid only 70% of the real value in the 3 years. Note: Banks are aware of this problem, and when inflation rises, their interest rates might rise as well. So don't take out loans based on this information.Many economists favor a low steady rate of inflation, low (as opposed to zero or negative) inflation may reduce the severity of economic recessions by enabling the labor market to adjust more quickly in a downturn, and reducing the risk that a liquidity trap prevents monetary policy from stabilizing the economy. The task of keeping the rate of inflation low and stable is usually given to monetary authorities. Generally, these monetary authorities are the central banks that control the size of the money supply through the setting of interest rates, through open market operations, and through the setting of banking reserve requirements.Tobin effect argues that: a moderate level of inflation can increase investment in an economy leading to faster growth or at least higher steady state level of income. This is due to the fact that inflation lowers the return on monetary assets relative to real assets, such as physical capital. To avoid inflation, investors would switch from holding their assets as money (or a similar, susceptible to inflation, form) to investing in real capital projects.
Suppose that inflation is -3 per year and it is expected to continue at that rate in the future If the nominal interest rate is 0 per year then what is the real interest rate?
-3
Suppose you place 10000 in a retirement fund that earns a nominal interest rate of 8 percent If you expect inflation to be 5 percent or lower then you are expecting to earn a real interest rate of?
3 percent
What is the correct formula for compound interest?
Suppose the amount invested (or borrowed) is K, Suppose the rate of interest is R% annually, Suppose the amount accrues interest for Y years. Then the interest I is 100*K[(1 + R/100)^Y - 1]
What is expected of citizens of the US?
They are suppose to follow the rulers.
What is expected of a citizen of the US?
They are suppose to follow the rulers.
Suppose that you plan on investing into an account paying simple interest The formula for simple interest is I equals Prt where I is the interest earned on a investment of P dollars at the given rate?
No. I is as described for the stated period.
What are the methods for accounting inflation?
Discuss the various methods of inflation accounting.
Suppose interest rates have been high the past 2years and you expect they will soon go down A reasonable strategy for bond investors during this time period would be to?
The market is always on a slope, and is therefore expected to do the complete opposite of its current standings in the following years. There for a bond investor would want to lock in the current interest rates by buying multiple bonds from the government, and in the future, when the interest rates lower, sell them in the market to individuals who are looking for the high interest rates you have, since those bonds will have higher returns.
Is inflation harmful?
Too much inflation will ruin the economy but small levels of inflation will spur growth. Inflation is very harmful to any economy because it can ruin the economy's development and growth and this is not suppose to be. Inflation is also very harmful to any economy because the people living in that economy might not survive the situation and this is when you see that an economy is affected and if nothing is done to it, it can cause an economy to collapse.
Suppose a movie ticket costs 7 dollars and inflation causes tickets to increase 4.5 percent a year for 5 years?
i no help you with ur math hw.
Did the directors of the Virginia company expected the Jamestown colot to be self-sufficient from the outset?
They were out for profit and to pay back the investors. It wasn't suppose to be a colony.
Do the legislative branch represent people interest?
It is suppose to , but sometimes it seems they are only concerned with their agenda and not the common good of the people.
