If a lender wants a real return of 6 per cent and she expects inflation to be 4 per cent, which of the following is the nominal interest rate to charge?
A) 4 per cent
B) 6 per cent
C) 2 per cent
D) 10 per cent

Question

Quizplus · Accepted Answer

The nominal interest rate is the real interest rate plus the inflation rate. So, nominal interest rate = real interest rate + inflation rate = 6% + 4% = 10%. Therefore, option D is correct.

If a Lender Wants a Real Return of 6 Per