Eliza Wants to Borrow $100 from Sandy

Multiple Choice

Eliza wants to borrow $100 from Sandy. Sandy wants to make 4% real return on his money, so they both agree on a 4% interest rate paid next year. Eliza and Sandy did not anticipate any inflation, yet the actual inflation turned out to be -5% next year. In this case,

A) Eliza will pay an 9% real interest rate.
B) Sandy is better off.
C) Eliza will pay a 4% nominal interest rate.
D) all of the above