Exhibit 30-3

-Refer to Exhibit 30-3.The real interest rate in year 5 is

Name: Exhibit 30-3 -Refer to Exhibit 30-3.The real interest rate in year 5 is
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Question

Exhibit 30-3
 
-Refer to Exhibit 30-3.The real interest rate in year 5 is

Quizplus · Accepted Answer

The real interest rate in year 5 can be calculated as [(1+nominal interest rate)/(1+inflation rate)-1]. From the exhibit, the nominal interest rate in year 5 is 5%, and the inflation rate in year 5 is 10%, so the real interest rate is [(1+0.05)/(1+0.1)-1]= -0.05 or -5%. Option D is the correct answer.

Exhibit 30-3 -Refer to Exhibit 30-3.The Real Interest Rate in Year 5