Suppose that you took out a $1,000 loan in January and had to pay $75 in annual interest.During the year,inflation was 6 percent.Which of the following statements is correct?

Question

Quizplus · Accepted Answer

The nominal interest rate is calculated as the interest paid divided by the loan amount, which is $75/$1000 = 7.5%. The real interest rate is the nominal rate minus inflation, which is 7.5% - 6% = 1.5%.

Suppose That You Took Out a $1,000 Loan in January