A Lender Need Not Be Penalized by Inflation If The

Multiple Choice

A lender need not be penalized by inflation if the:

A) long-term rate of inflation is less than the short-term rate of inflation
B) short-term rate of inflation is less than the long-term rate of inflation
C) lender correctly anticipates inflation and increases the nominal interest rate accordingly
D) inflation is unanticipated by both borrower and lender
E) long-term rate of inflation is the same as the short-term rate of inflation