Imagine That You Borrow $5,000 for One Year and at the End

question 120

Multiple Choice

Imagine that you borrow $5,000 for one year and at the end of the year you repay the $5,000 plus $600 of interest.If the inflation rate was 4%,what was the real interest rate you paid?

• A)16 percent
• B)12 percent
• C)8 percent
• D)6 percent

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Definitions:

Time Wages

A system of compensation based on the amount of time an employee works, usually expressed as an hour rate.