If a Lender Wants to Earn a Real Interest Rate

question 108

Multiple Choice

If a lender wants to earn a real interest rate of 3% and expects inflation to be 3%, he/she should charge a nominal interest rate that:

• A) is at least 7%.
• B) is anything above 0%.
• C) equals the real rate desired plus expected inflation.
• D) equals the real rate desired less expected inflation.

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