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WHAT IS THE DIFFERENCE BETWEEN NOMINAL INTEREST AND REAL INTEREST
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- The nominal interest rate is equal to the real interest rate plusA loan has an interest rate of 8%, and the inflation rate is 2.4%. What is the loan’s real interest rate adjusted for inflation?Suppose you take out a loan for school this year for $4500. The bank expects that the rate of inflation for next year will equal 2%. You and the bank agree that in one year's time, you will pay back the full amount at an interest rate of 6%. Next year though, there is a sudden rise in inflation, causing inflation to equals 7%. How much will you pay back in one year?
- How to calculate the investmentSuppose the annual nominal interest rate is 7 percent and the inflation rate is 7 percent. If you deposit $1,000 in an interest-bearing checking account, at the end of the year: Multiple Choice your purchasing power will have decreased. your purchasing power will have increased. your savings will have a nominal decrease your purchasing power will have stayed the same.Use the chart to answer the following question. Loan 1 Loan 2 Loan 3 Loan 4 Interest Rate Amount 3% 4% 5% 6%