An individual decides to reduce their expected consumption next year by 1 unit and, in return, increases their current consumption by 0.91 units. What is the real rate of interest? (a) 7.5% (b) 8.5% (c) 9.9% (d) 10.0%

EBK CFIN
6th Edition
ISBN:9781337671743
Author:BESLEY
Publisher:BESLEY
Chapter4: Time Value Of Money
Section: Chapter Questions
Problem 15PROB
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Please provide the solution to this general accounting question with accurate financial calculations.
An individual decides to reduce their
expected consumption next year by 1 unit
and, in return, increases their current
consumption by 0.91 units. What is the real
rate of interest?
(a) 7.5%
(b) 8.5%
(c) 9.9%
(d) 10.0%
Transcribed Image Text:An individual decides to reduce their expected consumption next year by 1 unit and, in return, increases their current consumption by 0.91 units. What is the real rate of interest? (a) 7.5% (b) 8.5% (c) 9.9% (d) 10.0%
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