Grant agreed to lend Kay $1,000 for one year at a nominal rate of interest of 5%. At the end of the year prices have actually risen by 7%. Who loses and who gains? Why? What is the real interest rate?

Q: The central bank is selling $100 worth of bonds payable in one year. The price it gets today is $98.…

A: Do you understand what the "implied interest rate" is? The implicit interest rate in a commercial…

Q: What is the equilibrium quantity of credit card balances when the nominal interest rate is zero?…

A: Nominal interest rate refers to the interest rate before taking inflation into account. Nominal can…

Q: Describe how interest could be  good or bad, depending on the situation, and explain why interest…

A: If properly managed, a LOW INTEREST RATE can be beneficial. Low interest rates reduce demand for the…

Q: Explain why negative real interest rates cannot exist in an economy that is properly functioning

A: When interest is given to borrowers rather than lenders, it is referred to as having a negative…

Q: Which situation leads to the distinction between nominal and effective interest?

A: If the compounding is more frequent than once per year, then the nominal and effective interest rate…

Q: After staying virtually flat for about a year and a half, the average lending rate of banks has…

A: After a reduction in monetary policy rate by the government. The Bank of Ghana announced the…

Q: The discount rate refers to the prime interest rate. O True O False

A: Discount rate is the rate at which central bank issues loans to its banks.

Q: Do the interest rates reflect the market interest rate?

A: An amount of money due per period as a proportion of the loan, deposit, or borrowing amount is…

Q: Q. Differentiate the Expected real interest rate to Realized real interest rates? Give examples.

A: The realized interest rate is given by subtracting the nominal rate from the current inflation rate.…

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: The relationship between the price of the bond and the market rate of interest rate? * a. Inversely…

A: Par value of a bond is the amount you will get at the time of maturity of the bond The market price…

Q: Which of the following statements about adjustable-rate mortgages is TRUE? Interest rates can't…

A: A mortgage with an adjustable rate of interest. Based on changes in an index rate, the rate…

Q: How do people typically respond to higher real interest rates? by saving less by paying more taxes…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: 20.Which of the following statements is correct?   a The interest rate that is usually reported is…

A: c If the nominal interest rate has decreased and the real interest rate has also decreased,…

Q: What might cause interest rates to be low one year and high the next?

A: Interest rates are best thought of as the "cost of money." If a borrower wishes to spend more money…

Q: As the treasurer of a manufacturing company, your task is to forecast the direction of interest…

A: With the ability to foresee changes in interest rates, economists can share their findings with…

Q: Suppose Emma owns an investment portfolio. Last year, she earned a 3.65% portfolio return. During…

A: answer is given below

Q: Assume that n= 1. The real interest rate is %. (Round your response to two decimal places.)

A: Real Interest Rate refers to the interest rate that has been adjusted for inflation. It shows the…

Q: if you expect the inflation rate to be 15 percent next year and a one-year bond has a yied to…

A: Inflation rate = 15  Yield to maturity = 7 %

Q: Suppose you purchase a $1,500 TIPS on January 1, 2020. The bond carries a fixed coupon rate of 5.5…

A: Given information: Purchase price = $1500 Fixed coupon rate = 5.5%

Q: Suppose that the investment function is I = 3,500 − 100r, where r is the real interest rate (in…

A: What Is an Investment? An investment is anything you buy with the hope of making money off of it or…

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: Will real wages start rising? If they don’t, should the central banks be raising the interest rate?…

A: If the real wages start rising, then there would be expansionary in the spending and even ability's…

Q: Suppose you take out a loan at your local bank. The bank expects to earn an annual real interest…

A: The nominal interest rate is the interest rate, arrived without adjusting for inflation, at which an…

Q: A Government issues a bond that pays 1000$ in 1 year. If the price of the bond is 920$, what is the…

A: Here, it is given that the government is paying an amount of $1000 for a bond, whose price is $920.

Q: Jack’s Lock and Key are considering remodeling. It estimates that the remodeling will cost $6,000…

A: Cost = $6,000 Revenue in 1st year = $3000 2nd year = $2500 Third year = $1500 i = 5%

Q: If the nominal rate of interest is 5 percent for a bond issued by the United States Government and…

A: The interest rate which is adjusted to eliminate the effects of inflation is called the real…

Q: What does this mean? "When drawn against the real interest rate, output supply increases if the…

A: “When drawn against the real interest rate, output supply increases if the labor supply is…

Q: Bankers make loans in the Nominal Interest Rate, so why do bankers care so much about the Real…

A: We know,  Nominal interest rate = Real interest rate - inflation rate

Q: The nominal interest rate is: A not adjusted by inflation. B less than the real rate of interest…

A: Option (A).

Q: Assume that you borrow $5,000, and you pay back the $5,000 plus $250 in interest at the end of the…

A: The real interest rate is adjusted to remove the effects of inflation.  A nominal interest rate…

Q: You hold a two-period bond that pays a coupon  at the end of each period. The interest rate is…

A: Holding a two-period bond, that pays a coupon at the end of each period with an interest rate of…

Q: Define the tern Market Interest Rates?

A: The rate of interest which prevails in the market on deposits and other investments determined by…

Q: The 1-year bond yield is currently at 0.5% and the 2-year bond yield is 1%. Inflation is expected to…

A: Here, information about bond yield for one year and 2 year is given with the inflation rate of 2% in…

Q: A businessman borrows money of $ 200,000 from the bank to be repaid in three years by a single…

A: Here, it is given that a specific amount of money is borrowed for three years at 12% interest rate.…

Q: Evidence on the Fisher Effect suggests that since 2010:       a. nominal interest rates are…

A: The inflation rate is the at which the price level in the economy rises. The nominal interest rate…

Q: Which state body determines the value of the interest rate and what instruments are used to regulate…

A: The central bank determines the value of the interest rate and what instruments are used to regulate…

Q: The rate of interest written on a contract between a borrower and a lender is the   a. expected…

A: The central-bank lends money to its member banks. The rate at which the central-banks loan them…

Q: If inflation rises, why is a bond more likely to be sold at a discount to its face value? Explain,…

A: Inflation: It refers to the increase in the prices of goods and services. The more increase in the…