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Finance

Your firm recently lent Arlington Enterprises $22,440,000 million for one year at an interest rate of 12.00%. Inflation during the year is expected to be 3.80%.

Answer the following questions to gauge the impact of inflation on the real interest to be paid. (Round all answers to 2 decimal places.)

a. How much interest income will your firm receive from the transaction, calculated the traditional way? Interest income $

b. What is the approximate real rate of interest? Approximate real rate of interest %

c. What is the real portion of the interest income? Real portion of interest income $

d. By how much will interest income be understated due to inflation? Understated interest $

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92748946

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