(Answered) Assume that the real interest rate is 2 and the expected

Finance

Assume that the real interest rate is 2%, and the expected inflation rate is 4%.

A) What is the nominal interest rate (before default & maturity premiums) that will be built into every loan contract?

B) Assume that the actual, future, inflation rate turns out to be 5%.

* Who benefits, and who losses, from inflation in this case?

* How will the realized real interest rate differ from the expected real interest rate?

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