An Investor Wants to Be Able to Buy 4 Percent

Multiple Choice

An investor wants to be able to buy 4 percent more goods and services in the future in order to induce her to invest today. During the investment period prices are expected to rise by 2 percent. Which statement(s) below is/are true?
I. 4 percent is the desired real risk-free interest rate.
II. 6 percent is the approximate nominal rate of interest required.
III. 2 percent is the expected inflation rate over the period.

A) I only
B) II only
C) III only
D) I and II only
E) I,II,and III are true.