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28 Sep 2019
Inflation affects creditors and debtors. Suppose the Canadiandebtors borrowed $100 from the Canadian creditors on December 31,1992 and promised to pay back $105 on December 31, 1993. This isequivalent to paying back a nominal interest rate of 5%.
1) Find the real interest rate, which is defined as real interestrate = nominal interest rate â inflation rate
2)Do the creditors gain or lose from this transaction? Explain
Inflation affects creditors and debtors. Suppose the Canadiandebtors borrowed $100 from the Canadian creditors on December 31,1992 and promised to pay back $105 on December 31, 1993. This isequivalent to paying back a nominal interest rate of 5%.
1) Find the real interest rate, which is defined as real interestrate = nominal interest rate â inflation rate
2)Do the creditors gain or lose from this transaction? Explain
1) Find the real interest rate, which is defined as real interestrate = nominal interest rate â inflation rate
2)Do the creditors gain or lose from this transaction? Explain
Yusra AneesLv10
28 Sep 2019