Business, 01.11.2019 06:31 JarretteWhitaker

Many kinds of loans, like student loans and mortgages, can be taken out at either a fixed or variable rate. a fixed rate loan allows the borrower to pay the same nominal interest rate for the entire lifetime of the loan, while a variable rate loan may experience changes in the nominal interest rate as the rate that banks charge each other for overnight loans changes. for this problem, assume that the variable nominal interest rate adjusts such that the associated real interest rate remains constant over time in the first year, inflation is 2.75 percent and the nominal interest rate for both fixed and variable rate loans is 5 percent. given this information, the real interest rate for fixed rate loans is percent and the real interest rate for variable rate loans ispercen response to the nearest two decimals) (round your in the second year, inflation rises to 3 percent. what happens to the interest rates on the loans described above? (the contracts were written before this new inflation rate was known.) given this information, the nominal interest rate or fixed rate loans is □ percent and the real interest rate response to the nearest two decimals) or fixed rate loans is percent round your given this information, the nominal interest rate for variable rate loans is percent and the real interest rate for variable rate loans is percent (round your response to the nearest two decimals)

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