Business, 11.02.2020 01:52 avillarreal332
Mary expects the inflation rate to be 5%, and she is willing to pay a real interest rate of 3%. Joe expects the inflation rate to be 5%, and he is willing to lend money if he receives a real interest rate of 3%. If the actual inflation rate is 6% and the loan contract specifies a nominal interest rate of 8%, then:
a)Joe is glad he lent out funds even though his real interest rate has fallen.
b)Joe is sorry he lent out funds since his real interest rate is now 9%.
c)Mary is glad she borrowed the funds because her real interest rate has fallen.
d)Mary is sorry she borrowed funds since her real interest rate is now 9%.
Answers: 3
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