Bob meets with a banker to discuss the terms of a 1- year loan. Bob and the banker both expect that inflation will be 4 percent over the next year and agree on a nominal interest rate of 9 percent. In actuality, the inflation rate is 5 percent over the next year.
(a) What was the expected real interest rate on the loan?
(b) What was the actual real interest rate on the loan?

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The Answer of Bob meets with a banker to discuss the terms of a 1- year loan. Bob and the banker both expect that inflation will be 4 percent over the next year and agree on a nominal interest rate of 9 percent. In actuality, the inflation rate is 5 percent over the next year.
(a) What was the expected real interest rate on the loan?
(b) What was the actual real interest rate on the loan?

Bob Meets with a Banker to Discuss the Terms of a 1-