Suppose the actual inflation rate is 2% over the next year. Once the loan has been repaid, what is the nominal rate of interest and real rate of interest?

Q: What is the nominal annual interest rate if the effective annual rate is 5.5% and compounding is…

A: In this question the compounding is continuous so the nominal rate needs to be converted to…

Q: All prices and costs are expected to rise at the general inflation rate of 2 percent after 1st year.…

A: Real cash flows are required to be discounted using appropriate real discount rate. Nominal cash…

Q: we compare the same regular monthly deposits made into an annuity due with an ordinary annuity with…

A: Ordinary Annuity: In an ordinary annuity, payments are made at the end of each period. For example,…

Q: If there is a deflation rate of 2% and your account is earning a nominal interest rate of 1.75%,…

A: Deflation rate (d) = 2% Nominal interest rate (r) = 1.75%

Q: Assume that time is measured in years and that interest rates are constant.  A cashflow of amount…

A: Present value refers to the current value of a future cash flow or series of cash flows, discounted…

Q: what should the nominal rate of interest​ be?

A: Nominal interest rate (NIR) refers to a interest rate which an investor is expect from his…

Q: If the payments are monthly how would you set up the present value?

A: The concept of present value asserts that a sum of money today is worth more than the same sum in…

Q: If the annual interest rate is 7%, what is the monthly interest rate that would be used as the "r"…

A: Time value of money (TVM) refers to the method used to measure the amount of money at different…

Q: What interest rate, compounded monthly, is equivalent to a 10.04% effective interest rate?

A: Effective interest rate : In simple words, the actual rate of return that an individual receives…

Q: Please answer quickly and correctly Suppose that the general inflation rate is 3% and the real…

A: As opposed to real interest rates and effective interest rates, nominal interest rates are the…

Q: What would you expect the nominal rate of interest to be if the real rate is 5 percent and the…

A: We require to compute the nominal rate of interest in this question.

Q: Suppose one-year T-bills currently yield 5.00% and the future inflation rate is expected to be…

A: Risk free rate can be calculated by using below equation Risk free rate =1+nominal risk free…

Q: What is the difference in present value between a perpetuity that pays $500 per year and an ordinary…

A: Annual payment (A) = $500 n = 23 years for ordinary annuity r = 7%

Q: One-year T-bills yield 1.00%. Based on future rates, the market expects that one year from now, new…

A: Pure Expectations Theory (PET) is used to compute the future rates because this theory defines that…

Q: The risk-free rate is 2.9%, and expected inflation is 2.1%. If inflation expectations change such…

A: Risk free rate:The risk-free rate is crucial in finance and economics as it helps determine the…

Q: The nominal interest rate on a loan is 12.5% and inflation is 3%. What is the real interest rate?

A: Information Provided: Nominal Rate = 12.5% Inflation = 3%

Q: What interest rate compounded monthly is equivalent to a 10% effective rate?

A: Given,  Effective rate=10% Compounding frequency=12

Q: If you borrow $100 at 5% interest rate (nominal) and inflation rate is 3%, what is the most accurate…

A: nominal interest rate = nr = 5% Inflation rate = ir = 3%

Q: You want to earn a real rate of return of 6.50% at a time when the inflation rate is 3.25%. What is…

A: Interest refers to the amount charged by the lender on the lent amount. The borrower of the loan is…

Q: Calculate the total present value at time 0 of a payment of £257 paid at time 4 and a payment of £67…

A: Using the PV formula given below, we can determine the Present value of an amount. PV = FV(1+r)n…

Q: If the rate of inflation is 6.5%, what nominal interest rate is necessary for you to earn 3.3% real…

A: Given information: Rate of inflation is 6.5% Real interest rate on investment is 3.3%

Q: what nominal rate of interest compounded monthly is equivalent to 12% per annum compounded…

A: The nominal rate of interest is the rate of interest that is considered before taking inflation.

Q: Suppose an annuity pays $2000 at the end of each 3 month period for 3.5 years at an interest rate of…

A: given, A = $2000 n = 3.5 r = 4% pa but it is compounded quarterly therefore, frequency of…

Q: Suppose an interest rate of 4% a) having $200 today is equivalent to having what amount in one year?…

A: (a) Interest  = 4% Present value =$200 Time = 1 year So, Amount at the end of one year =  Future…

Q: Hi there, I am trying to figure out how to calculate interest rates. If the interest rate is 3.75%…

A: Annual interest rate (r) = 3.75% or 0.0375Number of times compounding happens per year (n) = 4 (as…

Q: The annual inflation rate is expected to be 4.78% and the nominal (annual) interest rate is 5.75%.…

A: Inflation rate (π) =4.78% Nominal rate of interest (i)=5.75%. Using Fischer equation, real interest…

Q: Compute the number of years (t) if future value (FV) = $5575,  present value (FV) = $1812, and…

A: Future Value (FV) is a financial term used to describe the value of an asset at a future date, given…