Parks promotions inc is able to borrow at an interest rate, Ask an Expert

Finance

Parks Promotions, Inc. is able to borrow at an interest rate of 11 percent for one year. During that year, market participants expect 6 percent inflation.

a. What approximate real rate of return does the lender expect?

b. If inflation proves to be 4 percent for the year, does the lender suffer? Does the borrower suffer?

c. If inflation proves to be 8 percent, who gains and who loses?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91381282

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