If you lend money at a 9 nominal interest rate but you expec

If you lend money at a 9% nominal interest rate, but you expect inflation to be 5% over the life of the loan, then you expect your purchasing power to grow at a rate of 1% The real interest rate is negative when the nominal interest rate is If the nominal interest rate is 3% and the expected rate of inflation is 1%, then the real interest rate is the inflation rate. 0 B. 0%. ° C. 296. OD. 3%.

Solution

1)

Purchasing power growth rate=9%-5%=4%

2)

The real interest rate is negative when the nominal interest rate is lower than the inflation rate.

3)

Real interest rate is=3%-1%=2%

The above should be the answers..