Suppose Bob Considers Borrowing $100 from Sheila at a 10

question 106

Essay

Suppose Bob considers borrowing $100 from Sheila at a 10 percent interest rate.They both think that a 4 percent real interest rate would be fair.
a)What was the inflation rate they both expected?
b)If the inflation rate turned out to be 8 percent,how much was the real interest rate? Who gained and who lost from this transaction,and how much because of unexpected inflation?
c)If there was an interest tax of 30 percent,what is the after-tax real interest rate,with the inflation rate of 8 percent?

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My Lai

A village in Vietnam where a massacre of unarmed civilians by U.S. soldiers took place during the Vietnam War.

South Vietnamese

South Vietnamese refers to the people, culture, and former government of South Vietnam, known officially as the Republic of Vietnam, a country that existed from 1955 to 1975, during the Vietnam War era.

Paris Peace Accords

Agreements signed in 1973 to establish peace in Vietnam and end the Vietnam War, involving the US, North Vietnam, South Vietnam, and the Viet Cong.

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