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Suppose you take out a loan at your local bank. The bank expects to earn an annual real interest rate equal to 3 3%. Assuming

Suppose you take out a loan at your local bank. The bank expects to earn an annual real interest rate equal to 3

3%. Assuming that the annualized expected rate of inflation over the life of the loan is 1

1%, determine the nominal interest rate that the bank will charge you.

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