Suppose you borrow $1,000 of principal that must be repaid at the end of two years, along with interest of 5 percent a year. If the annual inflation rate turns out to be 10 percent,
(a) What is the real rate of interest on the loan?
For this I got -5%.
(b) What is the real value of the principal repayment?
?
2 answers
(b) Round to nearest two decimal places.
1000 * .90 * .90 = ?
1 answer