Anh Do is intending to lend money to his nephew to help him setup a business....

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Anh Do is intending to lend money to his nephew to help him setup a business. The loan will be made now, and is to be repaid in a lump sum after 3 years. Anh Do wishes to earn a real interest rate of 3.5% pa. He expects the inflation rate in the coming year to be 10% but believes that it will fall to 6% the following year and then to 4% in the third year. What annual interest rate should George set on the loan? Anh Do is intending to lend money to his nephew to help him setup a business. The loan will be made now, and is to be repaid in a lump sum after 3 years. Anh Do wishes to earn a real interest rate of 3.5% pa. He expects the inflation rate in the coming year to be 10% but believes that it will fall to 6% the following year and then to 4% in the third year. What annual interest rate should George set on the loan?

Answer rating: 100% (QA)

To calculate the annual interest rate that Anh Do should set on the loan we need to account for the ... View the full answer