The current inflation rate is 3.7 percent. A reliable inflation forecast shows that inflation is expected to fall by 1percent during the coming year. A lender wants an in purchasing power of $7,080 for a one-year loan. Using this information, answer the following questions. a. What is the expected inflation rate for the next year? b. What is the real rate of interest the lender wishes to earn on this loan? c. What nominal rate of interest should this lender charge?

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The Answer of The current inflation rate is 3.7 percent. A reliable inflation forecast shows that inflation is expected to fall by 1percent during the coming year. A lender wants an in purchasing power of $7,080 for a one-year loan. Using this information, answer the following questions. a. What is the expected inflation rate for the next year? b. What is the real rate of interest the lender wishes to earn on this loan? c. What nominal rate of interest should this lender charge?

The Current Inflation Rate Is 3