A firm owner Dan meets his banker, Cindy, to work out the details of a one-year loan. Both expect that inflation will be 2%, and they agree on a nominal interest rate of 3%. In reality, the inflation rate turns out to be 5%. The realized real interest rate is:

Select one:

a.lower than the expected real interest rate

b.higher than the expected real interest rate

c.positive

d.the same as the expected real interest rate