You Want to Make a 10% Real Return on a Loan

question 262

Multiple Choice

You want to make a 10% real return on a loan that you are planning to make, and the expected inflation rate during the period of the loan is 4%. You should charge a nominal interest rate of

• A) -6%.
• B) 6%.
• C) 10%.
• D) 14%.

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Definitions:

Projected Number

An estimate or forecast of a future quantity based on current trends, data analysis, or modeling.

Gold Suites

Luxury hotel accommodations that offer enhanced amenities, services, and possibly gold-themed decor to guests.

Price/Demand Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, often used to gauge the sensitivity of demand to price changes.

Projected Revenue

An estimate of the amount of money that an organization is expected to generate in a future period.