For each of the following years, determine the real interest rate. Find the difference between this rate and the desired real interest rate and explain how any difference affects borrowers and lenders. Write out percentage rates as whole numbers e.g. 5%.

a. In year 1, the nominal interest rate is 7%, the inflation premium on loans is 4%, and actual rate of inflation is 5%.

The real interest rate is %, the desired real interest is %, borrowers are (Click to select) better off unaffected worse off and lenders are (Click to select) better off unaffected worse off .

b. In year 2, the nominal interest rate is 8%, the inflation premium is 5%, and the actual rate of inflation is 3%.

The real interest rate is %, the desired real interest is %, borrowers are (Click to select) better off unaffected worse off and lenders are (Click to select) better off unaffected worse off .

c. In year 3, the nominal interest rate is 6%, the inflation premium is 3%, and the actual rate of inflation is 3%.

The real interest rate is %, the desired real interest is %, borrowers are (Click to select) better off unaffected worse off and lenders are (Click to select) better off unaffected worse off .