annual inflation
Suppose you are about to borrow $15,000 for four years to buy a new car. Briefly explain which of these situations you would prefer to be in:
a. The interest rate on your loan is 10%, and you expect the annual inflation over the next four years to average 8%.
b. The interest rate on your loan is 6%, and you expect the annual inflation rate over the next four years to average 2%.
annual inflation