Describes the purchasing power of payday palace

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On January 1, Sam took out a $1,000 personal loan from Payday Palace, a hypothetical short-term cash advance company, that charged him a fixed monthly interest rate. On January 31, Sam repaid this loan with interest, for a total repayment of $1,100. The rate of inflation during January was 2%. Which of the answer choices best describes the purchasing power of Payday Palace concerning its loan to Sam?

A. Payday Palace gained purchasing power since it earned $100 in interest from the loan.

B. Payday Palace gained purchasing power since its real return on the loan was positive.

C. Payday Palace lost purchasing power since the interest rate its imposed on the loan was less than the rate of inflation

D. Payday Palace lost purchasing power since its real return on the loan was less than ten percent.

Reference no: EM131110368

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