What approximate real rate of return does the lender expect

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Reference no: EM13811329

Parks Promotions, Inc. is able to borrow at an interest rate of 11 percent for one year. During that year, market participants expect 6 percent inflation.

a. What approximate real rate of return does the lender expect?

b. If inflation proves to be 4 percent for the year, does the lender suffer? Does the borrower suffer?

c. If inflation proves to be 8 percent, who gains and who loses?

Reference no: EM13811329

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