Question: 1. In each of the following examples, identify whether the person or institution will be penalized by inflation and, if so, why.
· Mosie borrows 5000$ for her college expenses at an interest rate of 4 percent to be paid off over 5 years, during which time the inflation rate averages 6 percent.
· Oscar invests 3000$ in securities that pay 5.3 percent annually for 10 years, and the inflation rate during that time averages 6.4 percent.
· The lilyton national bank commits to 4$ million in 15 year mortgages at an average mortgage rate of 7.75 percent. the inflation rate averages 8 percent over this 15 year period.
· Barney bought a house in 1995 for 100.000$ that he now plant to sell for 200.000$.during this time the inflation rate has averaged 3 percent.