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:

Uniform Commercial Code

A complete collection of regulations that oversee every business transaction within the United States.

Electronic Banking

The conduct of banking activities through electronic means, including online banking, ATMs, and electronic payments.

Drawer

In the context of banking and finance, the person who writes or issues a check or draft instructing the drawee to pay someone else.

Drawee

The party in a transaction upon whom a check, draft, or bill of exchange is drawn and is responsible for its settlement.