Unit 3 · Level 1 · Interest rates
Review: Interest rates
A rate is the price of money: borrowers pay it, savers earn it, risk raises it. Real rate = nominal minus inflation. The yield curve lines rates up by maturity, and its inversion is a historically decent (never perfect) recession warning. And when rates move, everything repriced in money moves too.
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What you get asked
A 6% return during 4% inflation is a real return of ___.
6 − 4 = 2. Real return is the only return your future self can actually spend.
Match the concept to its essence.
Four ideas that explain a remarkable share of financial news headlines.
Which saver is actually getting richer in real terms?
Only a positive real rate builds purchasing power. Of +2%, −2%, −3%, and exactly 0%, only one wins.
The yield curve just inverted. The wise takeaway is…
Between panic and dismissal sits the honest middle: a strong historical signal with unreliable timing. Adjust your caution, not your whole life.
Rates ripple through the whole economy because…
Mortgages, factories, bonds, stocks: anything bought with borrowed or invested money bends when its price changes. Now let's meet the institution that sets that price. 🐜
The rest of this unit
The price of money: how one number ripples through everything you own.