Your friend Justin Beiber wants to borrow money for a new tattoo.

You expect the rate of inflation $($over the term of the loan$)$ to be $4\%.$

You would like to earn a real return of $3\%$ on your loan to him.

$$

How much interest should you charge him?

Your friend Justin Beiber wants to borrow money for a new tattoo.

You expect the rate of inflation $($over the term of the loan$)$ to be $4\%.$

You would like to earn a real return of $3\%$ on your loan to him.

$$

How much interest should you charge him?

$0\mathrm{.}75\%$

$1\mathrm{.}0\%$

$1\mathrm{.}3\%$

$7\%$

$12\%$