Jake Loaned Elwood $6000 for One Year at a Nominal

Multiple Choice

Jake loaned Elwood $6000 for one year at a nominal interest rate of 12 percent. After Elwood repaid the loan in full, Jake complained that he could buy 5 percent fewer goods with the money Elwood gave him than he could before he loaned Elwood the $6000. What was the rate of inflation during the year?

A) 2.5 percent
B) 7 percent
C) 8 percent
D) 17 percent