Distinguish between nominal and real interest rates. Which is more relevant in making investment and R&D decisions? If the nominal interest rate is 12 percent and the inflation rate is 8 percent, what is the real rate of interest?
Q: What is the real interest rate if the nominal interest rate is 7.73% and the expected inflation rate…
A: The real interest rate is the inflation-adjusted interest rate. It shows the real cost of funds from…
Q: Grant agreed to lend Kay $1,000 for one year at a nominal rate of interest of 5%. At the end of the…
A: The real interest rate refers to the difference between the nominal interest rate and the inflation…
Q: When we add depreciation to net investment, we arrive at...............
A: When we add depreciation to net investment, we arrive at Gross Investment. Depreciation refers to…
Q: The nominal interest rate currently paid by local commercial banks is 8.5%. If the inflation rate is…
A: Real Interest rate refers to the interest rate that has been adjusted for inflation, reflecting the…
Q: What is Paid-in capital?
A: In exchange for stock, the shareholder gives a full amount of cash or asset to the company is known…
Q: You open a savings account with a 0.5% per year nominal interest rate, and the economy experiences…
A:
Q: It is the increase in the prices for goods and services from one year to another, thus decreasing…
A: Inflation rate is the rate at which the prices of goods and services in an economy rise over time.…
Q: how much tax does Serena pay on her gain
A:
Q: Optimizing economic agents use the real interest rate when thinking about the economic costs and…
A: The real average savings rate = Nominal rate- rate of inflation = 0.75-1.65% = (-)0.9% If banks…
Q: If the interest rate on a one-year loan is 5%5% and the expected inflation rate is −2%−2% for the…
A: Real interest rate= Nominal interest - Inflation rate Real interest rate is the actual interest an…
Q: Explain the process of Conversion from Constant to Actual Dollars?
A: The actual dollar(An) is the value of the dollar influenced by inflation. It shows the change in the…
Q: Which lending agreement represents the highest real rate of return for a bank when it lends its…
A: Real rate of return is computed with the help of following formula:Real rate = (1+Nominal rate) /…
Q: f the nominal interest rate is 9 percent and the real interest rate is 3 percent, then the inflation…
A: Fisher effect states that the Inflation rate is equal to the nominal rate minus the real Interest…
Q: Distinguish between nominal and real interest rates. Which is more relevant in making investment and…
A: Inflation defines the average amount of increment in price of final commodities and services. It is…
Q: If the price of a good is $200 in 2015 and $204 in 2019, what is the inflation rate? A) 22% B) 20%…
A: Inflation refers to the situation of increasing price level in the economy.
Q: Jay and Joyce meet George, the banker, to work out the details of a mortgage. They all expect that…
A: Real interest rate is interest rate adjusted for inflation.
Q: You are earning 5.2% on a certificate of deposit. Inflation is running 3.5%. What is the real rate…
A: Interest is the cost of capital. We can use interest in the context of either borrowed funds,…
Q: How is NAIRU supposed to be a "better" definition than "Natural Rate"? Are either of these good…
A: In an economy, the terms Nairu and natural rate of unemployment are used to explain market condition…
Q: The Fisher Effect equation can be used to determine the real interest rate. Use this equation to…
A: Given: Nominal interest rate (i) = 0.090 Inflation rate π=0.005
Q: For an imaginary economy, when the real interest rate is 7 percent, the quantity of loanable funds…
A:
Q: ers to the professed interest rate. a Nominal b Effective c Ordinal d Actual
A: Professed interest rate or stated rate is the rate that banks or lender shows the interest rate…
Q: If Net Investment = 0 in a given year, this indicates that we have neither lost nor gained capital.…
A: If Net Investment = 0 in a given year, this indicates that we have neither lost nor gained capital.…
Q: During a year of operation, a firm collects $450,000 in revenue and spends $100,000 on labor…
A: In the US, a higher personal tax will affect the personal disposable income and also will affect the…
Q: If banks expect that the rate of inflation in the coming year will be 4.95% and they want a real…
A: The real interest rate is the adjusted interest rate that doesn’t include the effect of inflation…
Q: What is the real interest rate if the nominal interest rate is 8% and the expectedinflation rate is…
A: Nominal interest rate minus inflation rate is the real interest rate. Nominal interest rate is 8%…
Q: Suppose you purchase a new house for $200 000, making a down payment of 5% and taking out a mortgage…
A: Suppose you purchase a new house for $200 000, making a down payment of 5% and takingout a mortgage…
Q: If inflation is currently 2.55% and a bank is lending money at 7.75% interest, what is the real…
A: Inflation (I) = 2.55% Bank interest rate (R) = 7.75%
Q: A futures market trades contracts on the growth rate for nominal GDP. The contract pays $X to the…
A: Given information: A future market trades contracts on the growth rate for nominal GDP. The contract…
Q: Which of the following statements about real interest rate is WRONG? Real interest is equal to…
A: Since you have asked multiple question, we will solve the first question for you. If you want any…
Q: The.... rate is equa to the ...... rate ...... the ....... rate a) real interest / nominal interest…
A: The question is based on the Fisher equation.
Q: Assume you just deposited $1,000 into a bank account. The current real interest rate is 2%, and…
A: The relation b/w the nominal & real interest rate, as well as inflation, is represented by the…
Q: f in a given situation, Px = 150, Pm = 180 Zx = 160 , and , then which of the following will be the…
A: Single factorial terms of trade Ts is a ratio of export price to import price adjusted for the…
Q: Define the term Return on Investment?
A: Return on investment measures the performance which is used to evaluate the efficiency of an…
Q: what is the steady state of equilibrium for capital labor (K) if the national savings rate is 0.14…
A: We know that at the equilibrium , Savings = Investment steady state of equilibrium for…
Q: Define the term the concept of return on investment?
A: Return on investment measures the performance which is used to evaluate the efficiency of an…
Q: Using you answer for Question 2, what will be the price per MMBtu of natural gas on June 30, 2022 if…
A: The price per MMBtu can be calculated by using the following equation. Price per MMBtu= Pi*(1+i)t
Q: Looking at business fixed investment, explain why investment is negatively related to the interest…
A: An asset or object purchased with the intention of producing income or appreciation is referred to…
Q: The real interest rate is the: O interest rate after taxes are deducted. O stated interest rate…
A: Inflation: The term inflation refers to the situation that indicates that the general prices of…
Q: On January 1, 2012, Albert invested $8,000 at 5 percent interest per year for three years. The CPI…
A: A continuous increase in the general price level is referred to as inflation. The rate of interest…
Q: Hula hoop fabricators cost 100 $ each. The Hi-Ho Hula HOOP Company (HHHHC) is trying to decide how…
A: Hello. Since your question has multiple sub-parts, we will solve first three sub-parts for you. If…
Q: The nominal interest rate is: A not adjusted by inflation. B less than the real rate of interest…
A: Option (A).
Q: If the expected inflation rate is 4 percent and the nominal interest rate is 9 percent, then the ex…
A: According to the Fisher Equation: The real interest rate is an inflation-adjusted nominal interest…
Q: Between 1929 and 1933, NNP measured in current prices fell from $96 billion to $48 billion. Over…
A: Answer: Given, Year NNP Price index 1929 $96 billion 100 1933 $48 billion 75 (a). %…
Q: Bangladesh is an agricultural country. They produce the majority of agricultural products for their…
A: There are two types of inflation, demand-pull inflation and cost push inflation. In other words, the…
Distinguish between nominal and real interest rates. Which is more relevant in making investment and R&D decisions? If the nominal interest rate is 12 percent and the inflation rate is 8 percent, what is the real rate of interest?
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- The nominal interest rate is equal to ? (a).Real interest +inflation (b). Real interest *inflation (c). Real interest -inflation (d)Real interest / inflation 2. Net investment is ......? (a). Gross investment minus household investment. (b). Gross investment minus government investment (c). Gross investment minus capital consumption allowance. (d). Gross investment minus inflationHula hoop fabricators cost 100 $ each. The Hi-Ho Hula HOOP Company (HHHHC) is trying to decide how many of these machines to buy. HHHHC expects to produce the following number of hoops each year for each level of capital stock shown. Number of Fabricators Number of hoops produced per year 0 0 1 100 2 150 3 180 4 195 5 205 6 210 Hula hoops have a real value of 1 $ each. HHHHC has no other costs of Fabricators. Find the expected future marginal product of capital (MPKf) in terms of Dollars for each level of capital. If the real interest rate is 12 % per year and the depreciation rate of capital is 20 % per year, find the user cost of capital. How many fabricators should HHHHC buy? Repeat part (b) for real interest rate of 8 % per year. Repeat part (b) for a 40 % tax on HHHHC sales revenue. A technical innovation doubles the number of hoops a fabricator can produce. How many fabricators should HHHHC buy when the real interest…Question 23 Not yet answered Marked bag question With no inflation, a bank would be willing to lend a business firm $5 million at an annual interest rate of 6 percent. But if the rate of inflation was anticipated to be 4 percent, the bank would most likely charge the firm an annual interest rate of Select one CA. 2 percent 08, 4 percent OC 6 percent. D. 10 percent
- If the real discount rate is 7% and the inflation rate is 10%, Which of the follo ing interest rates ill be sed to find the present orth of a which of the following interest rates will be used to find the present worth of a series of cash flows that are in constant-worth dollars? a. 10.0% b. 17.7% c. 7.0% d. 10.7%.Assume the following: Spot USDBRL = 5.0500 1YR USD Money Market Rates = 1.50% 1YR BRL Money Market Rates = 9.00% What is the 6MO USDBRL forward rate? (Recall that Money Market Rates are quoted as annualized rates)If the real interest rate is 11% and the rate of inflation is 3%, then if a firm can invest in a piece of machinery of $7,500 that will provide a profit stream of $3,000 per year for the next 3 years, what should the firm do? A. Invest in the machine b. Do not invest in the machine.
- If inflation is currently 2.55% and a bank is lending money at 7.75% interest, what is the real interest rate the bank is earning on its loans?Let's assume that Enrique borrows $420,000 from the Bank of America and let's assume that the interest rate on this loan is fixed at 9%. If the current inflation is 6%, then the real interest rate in percentage is:3. An investor wants to be able to buy 4% more goods and services in the future in order to induce her to invest today. During the investment period prices are expected to rise by 2%. Which statement(s) below is/are true? 1. 4% is the desired real rate of interestII. 6% is the approximate nominal rate of interest requiredIII. 2% is the expected inflation rate over the periodA. I onlyB. II onlyC. III onlyD. I and II onlyE. I, II, and III are true
- Lucy is tempted to buy 200 apples, with each one costing $2. However, she realizes that if she saves the money in a bank account she should be able to buy 240 apples. If the cost of the an apple increases by the rate of inflation, i.e. 8%, according to the Fisher equation, how much would the nominal rate (%) of the return on the bank account have to be? Explain with calculations and conclusionWhich lending agreement represents the highest real rate of return for a bank when it lends its money to a customer? A) a nominal interest rate of 11% with 5% inflation B) a nominal interest rate of 19% with 15% inflation C) a nominal interest rate of 8% with 1% inflation D) a nominal interest rate of 12% with 7% inflationA. Find the real value of your 40,000 salary for each of the next three year's. year1? year2? year3? b. If you have a cola in your contract, and the inflation rate is 5 percent, what is the real value of your salary for each year? year1? year2? year3?