60) Suppose that the forecast for next year's annual inflation rate is a = 5%, and for the annual interest rate is i = 4%. a) What will be the corresponding real rate of interest for the next year? b)...

Extracted text: 60) Suppose that the forecast for next year's annual inflation rate is a = 5%, and for the annual interest rate is i = 4%. a) What will be the corresponding real rate of interest for the next year? b) Using the values of a and i in part a), suppose you borrow $10 000 for a year at i = 4% and buy 5000 units of a certain item that has a current cost of $2 per unit. If the price of this item is tied to a rate of inflation, a = 5%, and you sell the items one year from now at the inflated price, what will be your net gain on this transaction?