Assuming a fixed interest rate loan, it is better to be a borrower of money if a

Question

Assuming a fixed interest rate loan, it is better to be a borrower of money if actual inflation is higher than the inflation that was expected at the time the loan was made. Indicate whether this statement is TRUE OR FALSE; and then provide support for your answer. Assuming a fixed interest rate loan, it is better to be a borrower of money if actual inflation is higher than the inflation that was expected at the time the loan was made. Indicate whether this statement is TRUE OR FALSE; and then provide support for your answer.

Explanation / Answer

Answer :-

This statement is true

As Suppose the person take the loan on the estimation that the inflation is 5% so the interest rate rise in future by 5% but now actually the inflation rises more than expected so the interest rates of the loan also rises but The borrower takes a loan on the basis of inflation less than actual at a fixed rate which means at low interest rate So it is beneficial to borrower

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