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2. Which economic situation (A or B) is more favorable as a lender, and why? (A) Nominal interest rate is 5 percent and expected inflation
2. Which economic situation (A or B) is more favorable as a lender, and why? (A) Nominal interest rate is 5 percent and expected inflation rate is 5 percent. (B) Nominal interest rate is 10 percent and expected inflation rate is 15 percent. 4. An Indonesian food producer borrowed 1 million US dollar from a US bank, converted the dollar into Indonesian Rupiah, and built some retail stores in Jakarta with the aim of expanding sales to its local consumers in Jakarta. Later, the US dollar appreciated sharply against Indonesian Rupiah. Did this exchange rate movement make the Indonesian producer's debt repayment easier or more difficult and why? Briefly explain. 9. (1) Compute the Net Present Value (NPV) for the following project when the interest rate is 10%. (2) Should you adopt or reject the project? You do not need to show the calculation process. Year 1 Year 2 Year 3 (Revenue from (Initial expenditure (Revenue from the the project) for the project) Cash flow -$100,000 $0 +$110.000 project)
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