With No Inflation, a Bank Would Be Willing to Lend

question 14

Multiple Choice

With no inflation, a bank would be willing to lend a business firm $5 million at an annual interest rate of 6 percent. But if the rate of inflation was anticipated to be 4 percent, the bank would most likely
Charge the firm an annual interest rate of

• A) 2 percent.
• B) 4 percent.
• C) 6 percent.
• D) 10 percent.