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Suppose you were borrowing money to buy a car. Consider the following situations.

Situationâ 1: Suppose the interest rate on your car loan is percent and the inflation rate is percent.

Required:
Calculate the real interest rate.

Respuesta :

Parrain

Answer: 1%

Explanation:

The real interest rate is the nominal interest rate adjusted for inflation so that a person might know how much of the interest is not eroded by inflation.

Real Interest rate = Nominal Interest rate - inflation

= 18% - 17%

= 1%

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