You borrow some amount of money for five years at a fixed rate of 4 percent.For the first three years,inflation is 3 percent,and for the last two years,deflation is 3 percent.Based on this information,your

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During the first three years, the nominal rate (4%) is higher than the inflation rate (3%), so the real rate is positive but less than the nominal rate. During the last two years, deflation (negative inflation of -3%) makes the real rate higher than the nominal rate.

You Borrow Some Amount of Money for Five Years at a Fixed