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Can I please have assistance with part (A) - (E) ? #11: Suppose you lend a friend $100 to be paid back in one year
Can I please have assistance with part (A) - (E) ?
#11: Suppose you lend a friend $100 to be paid back in one year at a nominal interest rate of 7%. (A) How much money will your friend owe you at the end of the year? (B) If you both expect at the time you made the loan that the inflation rate during the year would be 3%, what was the expected real rate of interest on the loan? (C) If the actual inflation rate was 2%, what was the actual real rate of interest on the loan? (D) Who gains, the borrower or the lender, from this unexpectedly low rate of inflation? Who loses? Why? (E) Under what circumstances would the real interest rate be negativeStep by Step Solution
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