Interest Rates Played a Part in the 1984 U Reconcile These Conflicting Claims

question 10

Essay

Interest rates played a part in the 1984 U.S. Presidential debates. Some politicians claimed that interest rates rose over the 1981-83 period, while others claimed rates fell. Below is a table showing interest rates and annual inflation rates from 1981 to 1983.
$$\begin{array} { | c | c | c | } \hline \text { Year } & \text { Interest Rate (annual \%) } & \text { Annual Inflation Rate } \\\hline 1981 & 14.03 \% & 10.3 \% \\\hline 1982 & 10.69 \% & 6.2 \% \\\hline 1983 & 8.63 \% & 3.2 \% \\\hline\end{array}$$ Reconcile these conflicting claims.

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Definitions:

Real Estate

Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water.

Impaired Note

A note receivable that has a reduced likelihood of being collected in full due to deterioration in the financial condition of the borrower.

Present Value

The present value of a sum of money or series of cash flows expected in the future, calculated using a specified discount or interest rate.

Contract Rate

It is the interest rate stated in a contract, such as a loan or lease agreement.