You have a loan with a balance of 100000 in todays dollars, Ask an Expert

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You have a loan with a balance of $100,000 in today's dollars. You don't have to make regular payments for this loan. All interest just gets added to the balance, and you repay it in full at the end of five years. The loan has a nominal APR of 6.7%, compounded monthly. How high would inflation have to be in order for the balance of your loan to only be worth a real $50,000, expressed in today's dollars, at the end of 5 years? Express your answer in annually compounding terms.

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