Dean borrows $400 from Tim. Tim wants to make a 10% real return on his money, so they both agree on a 10% interest rate paid next year. Dean and Tim did not anticipate any inflation, yet the actual inflation turned out to be 4% next year. In this case
A. Tim is better off.
B. Dean is better off.
C. Tim will receive more than 10% of real rate of return a year from now.
D. Dean will pay $56 a year from now on.
Answer: B
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