Suppose that you lend me $100 for a year,and that I agree to pay you $110 at that time (principal plus interest) .Over the intervening year,however,the average price of goods in the economy falls by 4%.The real rate of return that you will earn on your loan to me is therefore equal to
A) 10%.
B) 4%.
C) 14%.
D) greater than 14%.
E) 6%.
Correct Answer:
Verified
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