Fourteen years ago, the U.S. Aluminum Corporation borrowed $9.9 million. Since then, cumulative inflation has been 98 percent ( a compound rate of approximately 5 percent per year).

a. When the firm repays the original $9.9 million loan this year, what will be the effective purchasing power of $9.9 million?

b. To maintain the original $9.9 million purchasing power, how much should the lender be repaid?

c. If the lender knows he will receive only $9.9 million in payment after 14 years, how might he be compensated for the loss in purchasing power?