You Are Thinking About Buying a New Car and Will

You are thinking about buying a new car and will borrow $20,000 for this purchase at a 5% fixed rate for exactly one year.The lender (correctly) assumes that inflation will be 2% this year.Based on the above information and assuming you adhere to the terms of the loan:

A) you will pay back the lender exactly $20,000, which will represent $19,000 of purchasing power.
B) you will pay back the lender exactly $21,000, which will represent $21,000 of purchasing power.
C) you will pay back the lender exactly $21,000, which will represent $21,400 of purchasing power.
D) you will pay back the lender exactly $21,000, which will represent $20,600 of purchasing power.
E) you will pay back the lender exactly $19,600, which will represent $20,000 of purchasing power.