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Closest to the exact real interest rate

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Reference no: EM131246593

Suppose that John lent $2000 to a friend in 2010 and charges his friend a nominal interest rate of 15% (the loan is repaid in 2011). We measure John's real wealth in terms of one good: hotdogs. The price of each hotdog is $25 in 2010 and $30 in 2011. Which one of the following is closest to the exact real interest rate that John gets:

A) 4.16%

B) 5.0%

C) - 4.16%

D) -5.0%

E) 15%

Reference no: EM131246593

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