If a Lender Desires to Earn a Return of 4

question 136

Multiple Choice

If a lender desires to earn a return of 4 percent on a loan and the anticipated rate of inflation is 1 percent,the lender should charge a

• A)Real interest rate of 6 percent.
• B)Nominal interest rate of 4 percent.
• C)Real interest rate of 5 percent.
• D)Nominal interest rate of 5 percent.

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Definitions:

Recession

A significant decline in economic activity spread across the economy, lasting more than a few months.

Society

A structured community of people bound together by similar traditions, institutions, or nationality.

Waste Of Resources

The inefficient or ineffective use of materials, energy, effort, money, or time in achieving a goal or outcome.

Zero-Inflation Policies

Economic policies aimed at achieving a very low and stable rate of inflation, often through tight control of the money supply and interest rates.