A bank makes a loan for one year. the nominal annual interest rate is 7.5%. the real rate is 4%. over the course of the year, overall prices increase by 4%. this rate of inflation hurt the _ because the actual rate of inflation was _ than the anticipated rate.

Since nominal interest rate is [tex]Real Rate + Expected inflation rate\\[/tex], we can find the expected inflation rate as 3.5% ([tex]7.5% - 4%[/tex].

As long as the inflation remains below 3.5%, the bank will not feel the negative impact of inflation.

If it rises more than 3.5%, the bank will be negatively impacted since the value of the loan paid back to the bank will be lesser than the loan value when it was made.

In this case, inflation at 4% was greater than the anticipated inflation.

A bank makes a loan for one year. the nominal annual interest rate is 7.5%. the real rate is 4%. over the course of the year, overall prices increase by 4%. this rate of inflation hurt the _____ because the actual rate of inflation was _____ than the anticipated rate.

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A bank makes a loan for one year. the nominal annual interest rate is 7.5%. the real rate is 4%. over the course of the year, overall prices increase by 4%. this rate of inflation hurt the _ because the actual rate of inflation was _ than the anticipated rate.