223.2

2. A friend wants to borrow $100 from you. She promises to pay you back $115 in two years.

1. What annual interest rate is she offering you? (4 pts.)
   
2. If you have a bank account that pays 5%, compounded quarterly, is the loan a good deal for you (assume that you can be sure that she will pay you back)? (4 pts.)
   
3. If you expect inflation to be 3% per year (annual compounding), what real rates of return are you earning on the loan and your bank account? (6 pts.)
    

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