6.What is the real rate of interest if the nominal rate is 11.5%per year and the rate of inflation is 7%per year? Answer: Real interest rate Nominal interest rate-rate of inflation 1 rate of inflation =0.115-0.07 1.07 =0.04206 Real interest rate 4.21% 7.I have $200 today and am interested in finding out what its equivalent real future value will be in 40 years.What are the two ways I have available to me in computing the real future value? Answer: Compute the future value using the real rate of interest. 2 Compute the nominal future value using the nominal rate,and then deflate it to find the real future value. 8.You have decided to buy a car that costs $35,000.The dealer offers you a 5 year loan with monthly payments of $814 per month.What is the annual interest rate on the loan? Answer: i=1.165 The annual nominal interest rate 1.165 12 =13.98%per year 4-74-7 6. What is the real rate of interest if the nominal rate is 11.5% per year and the rate of inflation is 7% per year? Answer: Real interest rate = Nominal interest rate – rate of inflation 1 + rate of inflation = 0.115 – 0.07 1.07 = 0.04206 Real interest rate = 4.21% 7. I have $200 today and am interested in finding out what its equivalent real future value will be in 40 years. What are the two ways I have available to me in computing the real future value? Answer: 1. Compute the future value using the real rate of interest. 2. Compute the nominal future value using the nominal rate, and then deflate it to find the real future value. 8. You have decided to buy a car that costs $35,000. The dealer offers you a 5 year loan with monthly payments of $814 per month. What is the annual interest rate on the loan? Answer: i = 1.165 The annual nominal interest rate = 1.165 * 12 = 13.98% per year