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Author Question: If a financial institution extends a 25 year loan at a 6 percent interest rate, and then the ... (Read 118 times)

fahad

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If a financial institution extends a 25 year loan at a 6 percent interest rate, and then the inflation rate increases suddenly and unexpectedly to 6 percent per year, the institution receives on its loan a real return of
 
  A) minus 12 percent.
  B) zero percent.
  C) 6 percent.
  D) 12 percent.
  E) 36 percent.

Question 2

A savings and loan strives for a 6 real return on its loans and estimates a 7 annual rate of inflation. It should therefore charge its borrowers a nominal interest rate of
 
  A) 13.
  B) 7.
  C) 6.
  D) 1.17.
  E) 1.



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Kjones0604

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Answer to Question 1

B

Answer to Question 2

A




fahad

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Reply 2 on: Jun 29, 2018
Great answer, keep it coming :)


covalentbond

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Reply 3 on: Yesterday
Gracias!

 

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