Please help with this interest rate problem. First correct answer gets 10 points.?

Question

In Japan in 1998 and 1999, prices were falling at 2 percent per year while the short term interest rate was 0.1 percent per year.
What was the real interest rate?

Answer 1

The real interest rate is the nominal interest rate, less inflation. In this case, we have RI = 0.1 - (-2.0) = 2.1%.

Answer 2

In an attempt to coach you the thank you to fish somewhat of imparting you with a single fish, i'm going to stroll you by my logic right here. you could desire to be sure what you're given. the 1st 2 "givens" are which you have 25 years and 20 million. you could desire to have 25 equivalent money, meaning that each and each twelve months, you would be subtracting 800,000. i might say rule out d now, on account which you could no longer initiate with 800k, earn 4%, and subtract 800k mutually as nonetheless having extra money to earn extra activity. (besides, it somewhat is mostly a trick answer while a distinctive selection answer fits something else out of your equation.) If the quantity deposited is n and the activity basically compounds each and each year, on twelve months one, you're able to have n * a million.04 - 800,000. proceed this technique and you will locate that there is a sluggish decay right here which will final you 25 years. Plus activity Minus value twelve months 0 12,497,664.00 (immediately's deposit) twelve months a million 12,997,570.fifty six 12,197,570.fifty six twelve months 2 12,685,473.38 11,885,473.38 twelve months 3 12,360,892.32 11,560,892.32 twelve months 4 12,023,328.01 11,223,328.01 twelve months 5 11,672,261.13 10,872,261.13 twelve months 6 11,307,151.fifty 8 10,507,151.fifty 8 twelve months 7 10,927,437.sixty 4 10,127,437.sixty 4 twelve months 8 10,532,535.14 9,732,535.14 twelve months 9 10,121,836.fifty 5 9,321,836.fifty 5 twelve months 10 9,694,710.01 8,894,710.01 twelve months 11 9,250,498.40-one 8,450,498.40-one twelve months 12 8,788,518.35 7,988,518.35 twelve months 13 8,308,059.08 7,508,059.08 twelve months 14 7,808,381.40 5 7,008,381.40 5 twelve months 15 7,288,716.70 6,488,716.70 twelve months sixteen 6,748,265.37 5,948,265.37 twelve months 17 6,186,195.ninety 9 5,386,195.ninety 9 twelve months 18 5,601,643.80 3 4,801,643.80 3 twelve months 19 4,993,709.fifty 8 4,193,709.fifty 8 twelve months 20 4,361,457.ninety six 3,561,457.ninety six twelve months 21 3,703,916.28 2,903,916.28 twelve months 22 3,020,072.ninety 3 2,220,072.ninety 3 twelve months 23 2,308,875.80 5 a million,508,875.80 5 twelve months 24 a million,569,230.88 769,230.88 twelve months 25 800,000.12 .12 to that end, the respond is a.

Answer 3

This is a real world example of the liquidity trap. The answer is close to 2.1%. Technically, it isn't quite that rate however. If you get very technical it was approximately 2.14% which is 1.001/.98. It can also be thought of as approximately log(1.001)-log(.98).

Regardless, the 2.1% from simple subtraction or the logarithmic solution is usually close enough for most purposes.

Answer 4

same as in 1997

Answer 5

0.1 percent per year.?

Answer 6

is this a math problem?