Question

A bank loan has been given to a customer at a bank with a FIXED nominal interest rate of 13%. The real

interest rate for the bank's profit margin is 10%.
The next year, unanticipated INFLATION has increased another 7%.
The new real interest rate is
and the
was hurt.
O 3%; lender
O 15%; lender
O 8%; borrower
O 3%; borrower
O 5%; lender
O 8%; lender

Answer 1

The new real interest rate is 15%

and the lender was hurt.

O 15%; lender

Step-by-step explanation:

a) Data and Calculations:

Fixed nominal interest rate = 13%

Real interest rate for the bank's profit margin = 10%

Inflation rate = 3% (13% - 10%)

Unanticipated inflation rate = 7%

Nominal interest rate = 17% (10% + 7%)

But the bank could not increase its fixed nominal interest rate to match the nominal interest rate.