Your firm recently lent Arlington Enterprises $22,860,000 million for one year at an interest rate of 11.50%. Inflation during the year is expected to be 3.50%. Answer the following questions to gauge the impact of inflation on the real interest to be paid. (Round all answers to 2 decimal places.)

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

Interest income $

b. What is the approximate real rate of interest?

Approximate real rate of interest %

c. What is the real portion of the interest income?

Real portion of interest income $

d. By how much will interest income be understated due to inflation?

Understated interest $