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

question 176

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) 7%.
• B) 11%.
• C) - 1%.
• D) 1%.

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Definitions:

Allergy

An immune system reaction to a foreign substance (allergen) that is not typically harmful to the body, which can cause various symptoms like sneezing, itching, and swelling.

Muscle Aches

discomfort, soreness, or pain in the muscles, often resulting from overexertion, injury, or a health condition.

Common Cold

A viral infectious disease characterized by symptoms like runny nose, coughing, sore throat, and sneezing; highly contagious but usually mild.

Influenza

An extremely infectious virus that affects the respiratory system, triggering high temperatures, intense pain, and frequently results in severe health issues.