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Sarah buys a house in 1999. She obtains a mortgage that carries an annual interest rate of 12 per cent, and makes payments of $880

Sarah buys a house in 1999. She obtains a mortgage that carries an annual interest rate of 12 per cent, and makes payments of $880 per month. The CPI in 1999 is 100, in 2000 it is 110, and in 2001 it is 120. What is the real interest rate Sarah pays on her loan in 2001?

a. 0.9%

b. 2.91%

c. 9.09%

d. 21.09%

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