Suppose the Nominal Interest Rate on a One-Year Car Loan

Multiple Choice

Suppose the nominal interest rate on a one-year car loan is 8% and the inflation rate is expected to be 3% over the next year.Based on this information, we know:

A) The ex ante real interest rate is 5%
B) The lender benefits more than the borrower because of the difference in the nominal versus real interest rates
C) At the end of the year, the borrower pays only 5% in nominal interest
D) The ex post real interest rate 11%