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Suppose the Bank of Montreal Wants a 4% Real Rate

Question 92

Multiple Choice

Suppose the Bank of Montreal wants a 4% real rate of return on all its loans,and anticipates an annual inflation rate of 6%.It should therefore lend its money at a nominal interest rate of


A) 10%.
B) 9%.
C) 5%.
D) 4%.
E) 1%.

Correct Answer:

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