- 1

At = A0

(1+R = (1+r)*(1+

1) You took a 1,000$ borrower, with an annual interest rate of 3 percent.

• How much money you will have to return after one year?

• After 2 years?

• After 3 years?

• How much money you will have to return after a year, if the interest is paid every 6 month?

• After 3 years?

2) If the nominal interest rate is 4 percent, and you pay it every 4 month, what is the effective interest rate?

• If you pay it every quarter, what is the effective interest rate?

3) The inflation rate is 3 percent per year. The real interest rate is 5 percent per year. What is the nominal interest rate?

4) The inflation rate is 2 percent per year. The nominal rate is 10 percent. What is the real interest rate?

5) The nominal interest rate is 12%. The real interest rate is 4%.What is the inflation rate?