#4 Suppose your friend asks to borrow $100 from you and says he will pay you back in a year at an interest rate of 5% (suppose that you can trust him). You have three options: (A) to lend him the money, (B) to keep the money in cash under your floorboards, or (C) to put it into a bank account that adjusts for inflation. a) What must the inflation rate be for you to be retroactively indifferent between option A and option C? bl. Suppose it is 2021 and you have to make the decision You do not know what inflation will

#4 Suppose your friend asks to borrow $100 from you and says he will pay you back in a year at an interest rate of 5% (suppose that you can trust him). You have three options: (A) to lend him the money, (B) to keep the money in cash under your floorboards, or (C) to put it into a bank account that adjusts for inflation. a) What must the inflation rate be for you to be retroactively indifferent between option A and option C? bl. Suppose it is 2021 and you have to make the decision You do not know what inflation will

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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