Scenario: John is looking to buy a house in Bozeman. He has about $120,000 in savings, and the house he is interested in costs $300,000. When he approaches Boze Bank, the same bank at which all of his five brothers have accounts, he learns that he can borrow at a nominal interest rate of 5 percent. Inflation is 2 percent for 2 years after he buys the house and then increases to 3 percent. Assume that Boze Bank is the only bank in Bozeman and John's five brothers contribute a significant amount to the bank's total savings.
-Refer to the scenario above.John's brothers decide to invest all their money in a new business venture outside Bozeman.As a result,John will likely ________.

Question

Quizplus · Accepted Answer

John's brothers investing their money in a new business venture outside Bozeman does not affect his ability to borrow at a nominal interest rate of 5 percent. Therefore, he will not have to pay a higher principal on his house, take longer to pay off his loan, or have to borrow more money to buy the house.

Scenario: John Is Looking to Buy a House in Bozeman