Suppose you borrow $100 of principal that must be repaid at the end of two years, along
Question:
Suppose you borrow $100 of principal that must be repaid at the end of two years, along with interest of 4 percent a year. If the annual inflation rate turns out to be 8 percent,
(a) What is the real rate of interest on the loan?
(b) What is the real value of the principal repayment?
(c) Who loses, (A) the debtor (B) or the creditor? (Enter A or B.)
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Related Book For
The Macro Economy Today
ISBN: 978-1259291821
14th edition
Authors: Bradley R. Schiller, Karen Gebhardt
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