Suppose That You Lend Me $100 for a Year,and That

Multiple Choice

Suppose that you lend me $100 for a year,and that I agree to pay you $110 at the end of one year (principal plus interest) .Over the intervening year,however,the average price of goods in the economy rises by 3%.The real rate of return that you will earn on your loan to me is therefore equal to

A) 3%.
B) 7%.
C) 10%.
D) 13%.
E) greater than 13%.