If a financial institution extends a 25 year loan at a 6 percent ...

[fahad]

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.

[Kjones0604]

Answer to Question 1

B

Answer to Question 2

A

[fahad]

Excellent

[jojobee318]

Gracias!