Suppose the nominal annual interest rate on a two year loan is 16 percent and lenders expect inflation to be 10 percent in each of the two years.The annual real rate of interest is:
A)12 percent.
B)16 percent.
C)4 percent.
D)6 percent.

Question

Quizplus · Accepted Answer

The Answer of Suppose the nominal annual interest rate on a two year loan is 16 percent and lenders expect inflation to be 10 percent in each of the two years.The annual real rate of interest is:
A)12 percent.
B)16 percent.
C)4 percent.
D)6 percent.

Suppose the Nominal Annual Interest Rate on a Two Year