The Market Interest Rate in Alpha Is 7 Percent, and the Market

Multiple Choice

The market interest rate in Alpha is 7 percent, and the market interest rate in Beta is 10 percent; the inflation rate in Alpha is 3 percent, and inflation rate in Beta is 8 percent. Which of the following statements is true?

A) The real interest rate is higher in Alpha, but the nominal interest rate is higher in Beta.
B) The real interest rate is higher in Beta, but the nominal interest rate is higher in Alpha.
C) Both the real and nominal interest rates are higher in Alpha.
D) Both the real and nominal interest rates are higher in Beta.