Shmoop Finance

See: Inflation. See: Risk.

Rates are low. The economy is hummin'. Odds are good we get inflation.

The big risk here would be if we had loaned money to someone for a long duration (like a decade) at fixed rates. Call 'em 5%. But then inflation is 4.3234% a year, each year, for 10 years compounded. The value of that terminal, final principal repayment, on real terms then, would be low, relative to the damage inflation did to its eventual value.

Sad face.