Author Question: If the inflation rate is larger than the nominal interest rate, the real interest rate is (Read 174 times)

karen · **on:** Apr 19, 2019

Question 1

Celia wants to make an 8% real return on a loan that she is planning to make, and the expected inflation rate during the period of the loan is 5%. She should charge an interest rate of

◦ 3%.
◦ 5%.
◦ 8%.
◦ 13%.

Question 2

If the inflation rate is larger than the nominal interest rate, the real interest rate is

◦ positive.
◦ negative.
◦ zero.
◦ either positive or zero.

nathang24 · **Reply #1 on:** Apr 19, 2019

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