Marge Is Lending Martin $1,000 for One Year

Multiple Choice

Marge is lending Martin $1,000 for one year. The CPI is 1.60 at the time the loan is made. They expect it to be 1.76 in one year. If Marge and Martin agree that Marge should earn a 3 percent real return for the year, the nominal interest rate on this loan should be ________ percent.

A) 3
B) 7
C) 13
D) 16