If inflation is anticipated to be 6 percent during the next year, while the real rate of interest for a one-year loan is 5 percent, then what should the nominal rate of interest be for a risk-free one-year loan?
A) 6%
B) 11%
C) 5%
D) 12%

Question

Quizplus · Accepted Answer

Nominal rate of interest = Real rate of interest + Inflation rate
Nominal rate of interest = 5% + 6% = 11%

If Inflation Is Anticipated to Be 6 Percent During the Next