magine you borrow $500 from your roommate, agreeing to pay her back $500 plus 12 percent nominal interest in one year. Assume inflation over the life of the contract is expected to be 5.94 percent. What is the total dollar amount you will have to pay her back in a year? What approximate percentage of the interest payment is the result of the real rate of interest? Use the simplified Fisher equation

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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magine you borrow $500 from your roommate, agreeing to pay her back $500 plus 12 percent nominal interest in one year. Assume inflation over the life of the contract is expected to be 5.94 percent. What is the total dollar amount you will have to pay her back in a year? What approximate percentage of the interest payment is the result of the real rate of interest? Use the simplified Fisher equation. (Do not round intermediate calculations. Round answers to 2 decimal places, e.g. 17.54.)

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Total dollar amount
  $enter a dollar amount rounded to 2 decimal places   
Approximate percentage of interest attributable to the real rate of interest
  enter percentages rounded to 2 decimal places %
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