Suppose the Annual Nominal Interest Rate Is 4 Percent and the Inflation

Multiple Choice

Suppose the annual nominal interest rate is 4 percent and the inflation rate is 5 percent. If you deposit $1,000, at the end of the year:

A) you will have earned a real rate of return of 1 percent.
B) your purchasing power will have increased.
C) your savings will have a nominal increase of $40.
D) All of these statements are true.