Multiple Choice
If inflation is anticipated to be 5 percent during the next year, while the real rate of interest for a one-year loan is 5 percent, then what should the nominal rate of interest be for a risk-free one-year loan?
A) 5 percent.
B) 10 percent.
C) 25 percent.
D) None of the above.
Correct Answer:
Verified
Correct Answer:
Verified
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