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August 4, 2015

Homework Help: math

Posted by jay on Saturday, March 29, 2014 at 9:56am.

Suppose you borrow $1,000 of principal that must be repaid at the end of two years, along with interest of 5 percent a year. If the annual inflation rate turns out to be 10 percent,

(a) What is the real rate of interest on the loan?

For this I got -5%.

(b) What is the real value of the principal repayment?

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