Suppose two parties agree that the expected inflation rate for the next year is 6 percent. Based on this, they enter into a loanagreement where the nominal interest rate to be charged is 6 percent. If inflation for the year turns out to be 4 percent, who gains andwho loses?Instructions: Enter your responses as whole numbers.The ex ante real interest rate is10 percent. This is what borrowers think they are paying and lenders think theyare earning. With the actual inflation of 4 percent, the ex post real interest rate will bepercent.

The ex ante real interest rate refers to the expected or anticipated real interest rate on an…

Suppose two parties agree that the expected inflation rate for the next year is 6 percent. Based on this, they enter into a loan agreement where the nominal Interest rate to be charged is 6 percent. If inflation for the year turns out to be 4 percent, who gains ar who loses? Instructions: Enter your responses as whole numbers. The ex ante real interest rate is percent. This is what borrowers think they are paying and lenders think they are earning. With the actual inflation of 4 percent, the ex post real interest rate will be percent.

Suppose two parties agree that the expected inflation rate for the next year is 6 percent. Based on this, they enter into a loan agreement where the nominal Interest rate to be charged is 6 percent. If inflation for the year turns out to be 4 percent, who gains ar who loses? Instructions: Enter your responses as whole numbers. The ex ante real interest rate is percent. This is what borrowers think they are paying and lenders think they are earning. With the actual inflation of 4 percent, the ex post real interest rate will be percent.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Suppose I lend my friend Peter $100 for one year, and he agrees to repay me with interest. We each have an expectation that the inflation rate over the coming year will be 5 percent, and so we agree that he will pay me back at a nominal rate of 7 percent interest. a) What real rate of return do I expect to receive? b) What happens if inflation turns out to be 8 percent over the year? Who is made better off and who is made worse off? c) What happens if inflation turns out to be 3 percent over the year? Who is made better off and who is made worse off?
1. The index number representing the price level changes from 110 to 115 in 2019, and then from 115 to 120 in 2020. Since the index number increases by 5 this year, is five the inflation rate each year? Is the inflation rate the same each year?. NOTE: Explain and support the answer with calculations. 2. The total price of purchasing a basket of goods over four years is; year 1 - P940 year 2 - P970 year 3 - P1,000 year 4 - P1,070 Calculate two price indicates, one using year 1 as the base year (set equal to 100) and the other using the year 4 as the base year (set equal to 100). NOTE: Explain and support the answer with calculations.
7. Using you answer for Question 2, what will be the price per MMBtu of natural gas on June 30,2022 if this average inflation rate continues for the next 60 days (a total of 180 days from December 31,2021)? The nearest answer is:a. $8 b. $9 c. $10 d. $11 e. $12 Answer for 2 was 0.5%
Only typed answer If the inflation rate is 4% per year and the market interest rate is known to be 13% per year, what is the implied real interest (inflation-free) rate in this inflationary economy? The implied real interest (inflation-free) rate is? (Round to two decimal places)
calculate the percentage of inflation rate: -If the price level rises from 100 to 102 over a year ..................................................... - If it rises to 103 the next year, thenThe inflation rate for that year is............................
3. The index number representing the price level changes from 114 to 110 in one year. The inflation rate during the year is _____ percent. Round your answer to two digits to the right of the decimal (for example, 7.19) and do NOT include the word "percent" or the percent symbol in your answer. Negative rates are possible.
Makayla bought a $1,000, 5-year inflation - indexed bond that had a real interest rate of 5.10% when the CPI was 248.615. A year later, the CPI decreased to 219.313. What amount of interest (rounded to the nearest cent) will she receive? a. $ 57.81 b. $51.00 c. $44.99 d. $ 27.10
The table below shows the annual change in the average nominal wage and inflation rate since 2008. a. Compute the percentage change in real income for each year shown in the table. Instructions: In part a, round your answers to two decimal places. In parts b and c, enter your answers as a whole number. If entering a negative number, include a minus sign. Percentage Changes in Nominal Income and Prices Year 2008 2009 2010 2011 2012 2013 Annual Inflation Rate (percent) 3.92% -0.36 1.66 3.24 2.11 1.48 Annual Nominal Wage Growth (percent) 0.34% -1.24 -0.76 1.4 2.76 2.28 Annual Real Wage Growth (percent) (0.39) x % (0.88) ♥ 2.42 x 9.87 x b. Of the years listed above, the paycheck of the average worker declined in 2 c. Of the years listed above, the purchasing power of the average worker declined in of the six years. 4 of the six years. d. The average real income of households can increase whether the nominal wage increases or decreases
Suppose you'll have an annual nominal income of $20,000 for each of the next three years, and the inflation rate is 5 percent per year. Hint: Present value = Future value = (1 + Growth in prices)* = Real value of next year's income = Next year's income ÷ (1+ Growth in prices) Instructions: Round your responses to the nearest whole dollar. a. Find the real value of your $20,000 salary for each of the next three years. Year 1: $ Year 2: $ Year 3: $ b. If you have a COLA in your contract, what is the real value of your salary for each year? Year 1: $ 19047 Year 2: $ 18144 Year 3: $ 17276
just answer part c , d and e notice that you can do it without the answer of part a and b
The real interest rate is 6 percent a year and the income tax rate is 50 percent. With no inflation, what is the real after-tax interest rate? If the inflation rate rises to 4 percent a year, what is the real after-tax interest rate?
A. 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?