Which formula below best expresses the real interest rate, (r)?
A)i = r -$\pi$e
B)r = i + $\pi$e
C)r = i - $\pi$e
D)$\pi$e = i + r

Question

Quizplus · Accepted Answer

The formula for real interest rate is nominal interest rate (i) minus expected inflation rate (π). Therefore, the correct formula would be r = i - π. Option C is the only formula that includes both i and π, with the inflation rate being adjusted for using the exponential function e.

Which Formula Below Best Expresses the Real Interest Rate, (R) π\piπ

Which Formula Below Best Expresses the Real Interest Rate, (R) $\pi$