D) A firm signs a 3-year contract with a union based on a 2 percent anticipated rate of inflation per year, and the actual rate of inflation ends up
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# Could you please show how the problem is worked out, and why it equals 8 percent? src="/qa/attachment/10753384/" alt="real interest.jpg" /> ATTACHMENT PREVIEW Download attachment real interest.jpg D) A firm signs a 3-year contract with a union based on a 2 percent anticipated rate of inflation per year, and the actual rate of inflation ends up being 7 percent per year. 86) Imagine that you borrow \$5,000 for one year and at the end of the year you repay the \$5,000 plus \$600 of interest. If the inflation rate was 4%, what was the real interest rate you paid? A) 16 percent B) 12 percent C) 8 percent D) 6 percent

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