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Inflation affects creditors and debtors. Suppose the Canadian debtors borrowed $100 from the Canadian creditors on December 31, 1992 and promised to pay back $105 on December 31, 1993. This is equivalent to paying back a nominal interest rate of 5%.
a) Find the real interest rate, which is defined as real interest rate = nominal interest rate - inflation rate.
b)Do the creditors gain or lose from this transaction? Explain.
c)If the debtors want to borrow $100 again on December 31, 1993, what must be the minimum nominal interest rate that the debtors have to offer to pay the creditors on December 31, 1994, if your numerical answers above are known to everyone? Explain.
My brother has a house worth $400,000 and he has no mortgage as it is paid off! His utility bills and insurance and maintenance cost him about %500 per month and property taxes another $500 per month. He claims it only costs him about $1000 a mont..
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Montana is home to a number of firms offering wilderness hunting experiences to wealthy city dwellers. However, the profits of such firms depend on how crowded the "wilderness" is and how many deer are available.
skilled technicians using equipment produced by two leading competitors in the medical equipment industry. Records for the current year show an average of 24 tests per hour performed on the A-1, and 51 tests per hour on a new machine, the Caltec.
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