Five Review Questions

Five Review Questions - interest rates and inflation are at...

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Five Review Questions 1.) Expected interest rate is what lenders believe you are applicable to make within a year’s time the difference between this and Realized Interest Rate is the results you get after that hiatus year. Is the determining factor rather your interest rate levies better for the borrower or lender because the goal is for the inflation rate to be lower for the borrower and higher for lender. Realized Interest Rate is the more accurate and relevant for decision-making. 2.) Interest rates fluctuate due to the economy during a particular time period. Real Interest Rates are not constant it all depends on the market and the time period going on rather that be for the borrower or lender. 3.) Fisher Hypothesis is created by Irving Fisher his belief was that real interest rates and inflation would collide for in the long haul it would make interest rates stable for the long term . If the
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Unformatted text preview: interest rates and inflation are at a high than the theory can work. When the market is flowing naturally, the inflation would work perfectly into the equation of an interest rate. 4.) Investors do not like inflation because the bonds investors buy into does not make them profit because the companies are not making money. When a company is fluctuating at a constant flow, the interest on the bond will make more money for the investor visa versa if there is a high inflation. 5.) During a recession, your interest rates will decrease because once again if the company you invested a stock into is struggling not only will your interest rate decrease you are losing money. In a recession the major forces for expected interest rates is you can not predict how your bond will come out I mean do not expect to much with a tough economy if your company is struggling your bond will as well....
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This note was uploaded on 01/05/2012 for the course 101 melissa jo taught by Professor Acc101 during the Spring '11 term at Aarhus Universitet.

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Five Review Questions - interest rates and inflation are at...

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