Assume You Borrow Money to Buy a New Car at 10

question 63

Multiple Choice

Assume you borrow money to buy a new car at 10 percent interest,and you think that the economy-wide rate of inflation over the life of the loan will be 8 percent.If you are correct in your assumption,your real rate of interest on the car loan will be

• A)2 percent.
• B)8 percent.
• C)10 percent.
• D)18 percent.

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Definitions:

Milligram

A unit of mass equal to one thousandth of a gram, often used in medicine to specify drug dosages.

Grain

A unit of measure traditionally used in pharmacology and jewelry, equal to approximately 0.065 grams.

Milligram

A unit of mass equal to one thousandth of a gram.