Which of the Following Best Describes Inflation Risk

Multiple Choice

Which of the following best describes inflation risk?

A) The chance that a borrower will fail to repay a loan on time or default on the loan.
B) The chance that a major destructive event will reduce the rate of return on an investment.
C) The chance that the Federal Reserve will reduce the money supply, causing the borrower to have difficulty repaying the loan.
D) The danger that the overall price level will rise faster than the lender expected, so that the lender is paid back in dollars that are worth less than expected.