If the nominal interest rate is 80% and the rate of inflation is 50%, then the exact real rate of interest is
A)10%.
B)20%.
C)30%.
D)40%.
E)None of the above.

Name: If the nominal interest rate is 80% and the rate of inflation is 50%, then the exact real rate of interest is A)10%. B)20%. C)30%. D)40%. E)None of the above.
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Question

Quizplus · Accepted Answer

The exact real rate of interest can be calculated using the formula: (1 + nominal rate) / (1 + inflation rate) - 1. Plugging in the values: (1 + 0.80) / (1 + 0.50) - 1 = 0.20 or 20%.

If the Nominal Interest Rate Is 80% and the Rate