You Borrow $10,000 from a Bank for One Year at a Nominal

question 90

Multiple Choice

You borrow $10,000 from a bank for one year at a nominal interest rate of 5%.If inflation over the year is 2%, what is the real interest rate you are paying?

• A)2%
• B)2.5%
• C)3%
• D)5%
• E)7%