A Borrower Who Makes a $1,000 Loan for One Year

question 93

Multiple Choice

A borrower who makes a $1,000 loan for one year and earns interest in the amount of $75, earns what nominal interest rate and what real interest rate if inflation is two percent?

• A) A nominal rate of 5.5% and a real rate of 2.0%.
• B) A nominal rate of 7.5% and a real rate of 5.0%.
• C) A nominal rate of 7.5% and a real rate of 9.5%.
• D) A nominal rate of 7.5% and a real rate of 5.5%.

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