SMG FE 101 Lecture Notes - Lecture 6: Real Interest Rate, Nominal Interest Rate, Loan
Document Summary
Consider the timeline for a k car loan with these terms: 6. 75% apr for 60mo. Lets say that you are now 2 years into a k car loan (at 5. 5% apr originally for 48 months) and you decide to sell the car. When you sell the car you will need to pay whatever the remaining balance is on your car loan. The rate at which your money will grow if invested for a certain period. The rate of growth of your purchasing power after adjusting for inflation. At the start of 2008 one year us government bond rates were about 3. 3% while the inflation rate that year was 0. 1%. At the start of 2011 one year interest rates were about 0. 3% and the inflation rate that year was about 3%. Real rate = nominal - inflation/ 1+ inflation rate = nominal rate - inflation rate. You are taking a 72 month auto loan.
