Complete the following sentence based on your knowledge of interest rates, credit and debt: (could you also explain the calculations?, especially how to calculate the real interest rate?)

1.

" If the annual interest rate is 10%, this means that 100 euros today are equivalent to ____ euros in one year and that 100 euros available in one year are equivalent to ____ euros today. If inflation is 5%, the real interest rate will be equivalent to ____ if the nominal rate interest rate decreases from 10 to 8%, creditors are ____ because ____ ."

2.

" If the annual interest rate is 6%, this means that 100 euros today are equivalent to ____ euros in one year and that 100 euros available in one year are equivalent to ____ euros today. If inflation is 3%, the real interest rate will be equivalent to ____ if the nominal rate interest rate decreases from 6 to 4%, creditors are ____ because ____ ."

3.

" If the annual interest rate is 10%, this means that 100 euros today are equivalent to ____ euros in one year and that 100 euros available in one year are equivalent to ____ euros today. If the interest rate decreases from 10 to 5%, creditors___ because ___ while debtors ___ because ___ ."

4.

Consider the case of an individual observed over two time periods. The income of the first period Y1 is equal to 100. The income of the second period Y2 is 500. The interest rate (1+r) is 1.1 (10% per year). The intertemporal utility function is given by U(C1, C2)=C1C2, where C1 is the consumption in the first period and C2 is the consumption in the second period.

Determine the consumer's optimal choice and explain whether he decides to save or go into debt and why.