Jake Loaned Elwood $6000 for One Year at a Nominal

question 94

Multiple Choice

Jake loaned Elwood $6000 for one year at a nominal interest rate of 12 percent. After Elwood repaid the loan in full, Jake complained that he could buy 5 percent fewer goods with the money Elwood gave him than he could before he loaned Elwood the $6000. What was the rate of inflation during the year?

• A) 2.5 percent
• B) 7.0 percent
• C) 8.0 percent
• D) 17.0 percent

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Definitions:

Prefix

A word, letter, or number placed before another to alter its meaning or create a new term.

Re-

A prefix meaning again or back, used to indicate repetition or reversal.

Prefix

A collection of characters placed before a word to alter its definition, like 'un-' in 'unhappy'.

Ad-

A prefix meaning toward or in the direction of, often used in medical terms.