Suppose the real interest rate in Brazil is 40 percent, actual inflation is 20 percent, and expected inflation is 20 percent. The nominal interest must then be:

Question

Quizplus · Accepted Answer

The nominal interest rate can be calculated using the Fisher equation, which is: nominal interest rate = real interest rate + expected inflation rate. Here, it's 40% (real interest rate) + 20% (expected inflation) = 60%.

Suppose the Real Interest Rate in Brazil Is 40 Percent