Becka borrowed $100 from her cousin at the rate of 6% per year. If the inflation rate was 2% that year, what is her cousin's actual rate of return on the loan?
How do you work this out?
1 answer
The actual rate of return on the loan can be calculated by subtracting the inflation rate from the interest rate. In this case, the actual rate of return is 4% (6% - 2%).