Assume you borrow funds to buy a new car at 3 percent interest and you think that the economy-wide rate of inflation over the life of the loan will be 2 percent. If you are correct in your assumption, your real rate of interest on the car loan will be a. 1 percent. b. 2 percent. c. 5 percent. d. 3 percent.
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Parrain 4 months ago
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Based on the interest rate of the funds for the car and the economic inflation, the real interest rate will be a. 1 percent.

How do you find the real interest rate?

The real interest rate the nominal rate less the inflation rate.

The real interest rate here is therefore:

= Interest rate - inflation

Solving gives:

= 3% - 2%
= 1%

Find out more on the real rate at https://brainacademy.pro/question/6106690.

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