You want to make a 5% real return on a loan that you are planning to make, and the expected inflation rate during the period of the loan is 6%. You should charge a nominal interest rate of:

Question

Quizplus · Accepted Answer

To calculate the nominal interest rate, we add the real return to the inflation rate. In this case, the nominal interest rate would be 5% (real return) + 6% (inflation) = 11%.

You Want to Make a 5% Real Return on a Loan