jay and joyce meet george, the banker, to work out the details of a mortgage. they all expect that inflation will be 2 percent over the term of the loan, and they agree on a nominal interest rate of 6 percent. as it turns out, the inflation rate is 5 percent over the term of the loan. a. what was the expected real interest rate? b. what was the actual real interest rate? c. who benefited and who lost because of the unexpected inflation?

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12-10-2022
Business

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jay and joyce meet george, the banker, to work out the details of a mortgage. they all expect that inflation will be 2 percent over the term of the loan, and they agree on a nominal interest rate of 6 percent. as it turns out, the inflation rate is 5 percent over the term of the loan. a. what was the expected real interest rate? b. what was the actual real interest rate? c. who benefited and who lost because of the unexpected inflation?

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Paruljain Paruljain · Answer 1 · 2022-10-15T17:24:37+02:00

Jay and joyce meet george, the banker, to work out the details of a mortgage the loan, and they agree on a nominal interest rate of 6% . as it turns out, the inflation rate is 5 percent over the term of the loan

The lending of money by one or more people, businesses, or other entities to other people, businesses, or other entities is known as lending in the world of finance. The recipient, or borrower, incurs a debt and is often responsible for paying interest on that loan until it is returned in addition to the primary amount borrowed. In the field of economics, inflation refers to a general rise in an economy's prices for products and services.

a) Expected real interest rate is 6-2=4 percent

b)actual real actual=6-5=1%

c)Jay and Joyce benefit because higher inflation means that their money is worth more.

The promissory note or equivalent document used to prove the debt will typically include information such as the principle amount borrowed, the interest rate being charged by the lender, and the due date. The relevant asset(s) will be temporarily reallocated between the lender and the borrower as part of a loan.

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