document.write( "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 _________. \n" ); document.write( "

Algebra.Com's Answer #669916 by Fombitz(32388) $\"\"$ $\"About$

You can put this solution on YOUR website!
So if there was no inflation, you would have received a $\"%28%28630-600%29%2F600%29%2A100=5\"$
\n" ); document.write( "5% interest rate
\n" ); document.write( "With the inflation, the actual rate is $\"5-4=1\"$
\n" ); document.write( "1% real interest rate.
\n" ); document.write( ".
\n" ); document.write( ".
\n" ); document.write( ".
\n" ); document.write( "The real interest rate using the Fisher equation is,
\n" ); document.write( " $\"r=%281%2Bi%29%2F%281%2BI%29-1=%281%2B0.05%29%2F%281%2B0.04%29-1=0.009615\"$
\n" ); document.write( "0.96% real interest rate.
\n" ); document.write( " \n" ); document.write( "

\n" );