Jamie Borrowed $1,000 from His Uncle for One Year

question 136

Essay

Jamie borrowed $1,000 from his uncle for one year.His uncle wanted Jamie to learn a thing or two about interest rates,so he told Jamie only that he wanted his actual interest rate to be 5%.In addition,he mentioned that he expected inflation to be 3% over the loan period.Jamie was puzzled.If he promised to pay his uncle in full at the end of the year,how much did Jamie need to pay him?

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Definitions:

Andesite

A volcanic rock of intermediate composition, typically found in volcanic arcs associated with subduction zones.

Volcanic Domes

Rounded, bulbous formations of lava that accumulate near and around volcanic vents, often resulting from the slow extrusion of viscous lava.

Volcanic Glass

A type of rock that forms from the rapid cooling of magma without crystallization, resulting in a smooth, glassy texture.

Volcanic Dome

A rounded mound formed by the slow extrusion of viscous lava from a volcano.