he Fisher effect implies that lenders set a nominal interest following the general relationship i= E[π] + rmkt, where i is the nominal interest rate, and r is the competitively determined rate of return.  Which best describes redistribution between borrowers and lenders if inflation unexpectedly rises?   a. The nominal interest rate, i, from a loan will be too low and the real rate of return will increase. b. The nominal interest rate, i, from a loan will be too low and the real rate of return will decrease. c. The nominal rate set at the time of loan agreements will be too high, and the real rate of return will decrease. d. The Fisher effect is based entirely on perfect information for inflation, ie E[π] = π. e. None of the above

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