You Want to Make a 5% Real Return on a Loan

question 49

Multiple Choice

You want to make a 5% real return on a loan that you are planning to make, and the expected inflation rate during the period of the loan is 6%. You should charge a nominal interest rate of:

• A) - 11%.
• B) - 1%.
• C) 1%.
• D) 11%.

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Definitions:

Alliance

A union or association formed for mutual benefit, especially between countries or organizations.

Superego

Part of Sigmund Freud's psychoanalytic theory, representing the ethical component of the personality and providing the moral standards by which the ego operates.

Moral Component

This refers to the aspects of decision-making that involve ethics, values, and principles of right and wrong.

Mediating Agent

An entity or factor that intervenes or facilitates a process or interaction between other entities or phenomena.