If a Lender Charged a 4 Percent Nominal Interest Rate

Multiple Choice

If a lender charged a 4 percent nominal interest rate and the expected inflation rate is 1 percent,what is the difference between the real rate the lender received and the real rate the lender expected when actual inflation ended up being 1 percent?

A) 2 percent
B) 4 percent
C) -4 percent
D) 1 percent
E) 0 percent