Multiple Choice
You borrow money to buy a house in 2012 at a variable interest rate of 6.5%.Your interest rate is always 2% more than the rate of inflation.By 2016,the inflation rate has risen to 8.5%.Considering only your mortgage,is inflation good news or bad news for you?
A) bad news, because inflation hurts everyone
B) good news, because it makes the real value of your mortgage payments decrease
C) bad news, because it makes the nominal value of your mortgage payments increase
D) neither, because your interest rate is tied to the rate of inflation
Correct Answer:
Verified
Correct Answer:
Verified
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