Assume That a Lender Had Lent $2,500 at the Rate

Multiple Choice

Assume that a lender had lent $2,500 at the rate of 12 percent per annum for a year, expecting an inflation rate of 3 percent.However, at the end of the year rate of inflation increased to 5 percent.The purchasing power of the lender:

A) will decline by $51.78
B) will appreciate by $51.78
C) will decline by $211.54
D) will appreciate by $211.54