Since one can choose between holding bonds or holding cash, the cost of holding cash is the nominal interest rate of holding bonds. Meanwhile, the nominal rate of return of holding cash is always 0% (because it does not generate any interest payment).
So, the cost of holding money is 5%, the nominal return of holding money is 0%.
Recall that the relationship between expected real interest rate and expected inflation rate is given by:
Expected real interest rate = Nominal interest rate - Expected inflation rate
So, the expected real interest rate = 5% - 3% = 2%.