A commercial bank offers a one-year certificate of deposit (CD) that pays a 5% nominalinterest rate. If the expected rate of inflation equals 2% per year, what is the real interestrate that the bank CD offers? Compute this using both the 'approximate' Fisher equationand the exact version. Suppose you and I agree today that the expected inflation rate for the next year is 3%. Wethen enter into a one-year loan agreement with a nominal interest rate of 6%. If the actualinflation rate over the next year turns out to be 2%, explain whether the lender or borrowerbenefits, and why