savings account * 1 point\nbeginning balance $1,000\napr 5%\nannual inflation rate 8%\naccount balance…

savings account * 1 point\nbeginning balance $1,000\napr 5%\nannual inflation rate 8%\naccount balance $1,050\nwhat is the real rate of return?\n-1%\n1%\n-3%\n3%\nloan amount $200,000 * 1 point\nloan term 30 years\ninterest rate 6%\nmonthly payment $1,199.10\nannual payment $14,389.20\n54% payment on interest\n46% payment on principal\nwhich statement is true?\nmonthly payments will steadily decrease over the life of the term\nmonthly payments will steadily increase over the life of the term\nmonthly payments will remain the same

savings account * 1 point\nbeginning balance $1,000\napr 5%\nannual inflation rate 8%\naccount balance $1,050\nwhat is the real rate of return?\n-1%\n1%\n-3%\n3%\nloan amount $200,000 * 1 point\nloan term 30 years\ninterest rate 6%\nmonthly payment $1,199.10\nannual payment $14,389.20\n54% payment on interest\n46% payment on principal\nwhich statement is true?\nmonthly payments will steadily decrease over the life of the term\nmonthly payments will steadily increase over the life of the term\nmonthly payments will remain the same

Answer

Explanation:

Step1: Recall real - rate formula

The formula for the real rate of return $r$ is $r=\frac{1 + i}{1 + \pi}-1$, where $i$ is the nominal interest rate and $\pi$ is the inflation rate. Here, the nominal interest rate $i = 0.05$ (5% APR) and the inflation rate $\pi=0.08$ (8% annual inflation rate).

Step2: Substitute values

$r=\frac{1 + 0.05}{1+0.08}-1=\frac{1.05}{1.08}-1\approx0.9722 - 1=- 0.0278\approx - 3%$

For the loan part: In a fixed - rate loan, the monthly payment amount is calculated using the formula $M = P\frac{r(1 + r)^n}{(1 + r)^n-1}$, where $M$ is the monthly payment, $P$ is the principal loan amount, $r$ is the monthly interest rate, and $n$ is the total number of payments. Since it is a fixed - rate loan, the monthly payments will remain the same over the life of the term.

Answer:

  1. C. -3%
  2. C. monthly payments will remain the same