The consumer price index was 120 in 2013 and 126 in 2014.The nominal interest rate during this period was 8 percent.What was the real interest rate during this period?
A)3 percent
B)2 percent
C)3.3 percent
D)12.8 percent

Question

Quizplus · Accepted Answer

The real interest rate can be calculated using the formula: Real Interest Rate = Nominal Interest Rate - Inflation Rate. The inflation rate is calculated as ((126 - 120) / 120) * 100 = 5%. Therefore, the real interest rate is 8% - 5% = 3%.

The Consumer Price Index Was 120 in 2013 and 126