SOLUTION: Suppose I loaned Liz $600 and she paid me $630 after one year. During this time, the inflation rate was 4%. The REAL interest rate that I collected from Liz was ________

SOLUTION: Suppose I loaned Liz $600 and she paid me $630 after one year. During this time, the inflation rate was 4%. The REAL interest rate that I collected from Liz was _________.

Question 1054703: Suppose I loaned Liz $600 and she paid me $630 after one year. During this time, the inflation rate was 4%. The REAL interest rate that I collected from Liz was _________.
Answer by Fombitz(32388) (Show Source): You can put this solution on YOUR website!
So if there was no inflation, you would have received a
5% interest rate
With the inflation, the actual rate is
1% real interest rate.
.
.
.
The real interest rate using the Fisher equation is,

0.96% real interest rate.

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