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 that time (principal plus interest) .Over the intervening year,however,the average price of goods in the economy falls by 4%.The real rate of return that you will earn on your loan to me is therefore equal to

A) 4%.
B) 6%.
C) 10%.
D) 14%.
E) greater than 14%.