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b. Suppose that in year 2, the real interest rate changes to 6 percent while inflation remains constant at 2 percent. In year 2, the nominal interest rate must be percent.

b. Suppose that in year 2, the real interest rate changes to 6 percent while inflation remains constant at 2 percent. In year 2, the nominal interest rate must be percent.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Suppose that in year 1, Acme Corporation can make a real (inflation-adjusted) return on an investment of 2 percent. Assume the nominal interest rate is 6 percent and the inflation rate is 2 percent. Instructions: Enter your answer as a whole number. a. Using this information, we can conclude that the investment would not be profitable b. Suppose that in year 2, the real interest rate changes to 6 percent while inflation remains constant at 2 percent. In year 2, the nominal interest rate must be c. Now suppose that in year 2, the real (inflation-adjusted) return on an investment is 9 percent. In this case, we can conclude that the investment would be profitable percent.
Transcribed Image Text:Suppose that in year 1, Acme Corporation can make a real (inflation-adjusted) return on an investment of 2 percent. Assume the nominal interest rate is 6 percent and the inflation rate is 2 percent. Instructions: Enter your answer as a whole number. a. Using this information, we can conclude that the investment would not be profitable b. Suppose that in year 2, the real interest rate changes to 6 percent while inflation remains constant at 2 percent. In year 2, the nominal interest rate must be c. Now suppose that in year 2, the real (inflation-adjusted) return on an investment is 9 percent. In this case, we can conclude that the investment would be profitable percent.
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