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Real rate of interest on the loan

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Suppose you borrow $100 of principal that must be repaid at the end of two years, along with interest of 5 percent a year. If the annual in flation rate turns out to be 10 percent,

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

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

(c) Who loses, (A) the debtor (B) or the creditor? (Enter A or B.)

Reference no: EM131079589

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