Your firm recently lent Arlington Enterprises $22,580,000 for one year at an interest rate of 12.50%. Inflation during the year is expected to be 4.10%. Answer the following questions to gauge the impact of inflation on the real interest to be paid. Required:

a. How much interest income will your firm receive from the transaction, calculated the traditional way?

b. What is the approximate real rate of interest? (Round all answers to 2 decimal places.)

c. What is the real portion of the interest income using the approximate real rate?