If the current inflation rate is 4% and you have an investment opportunity that pays 10%, then the real rate of interest on your investment is closest to:

Question

Quizplus · Accepted Answer

The real rate of interest takes into consideration inflation. To calculate it, we subtract the inflation rate from the nominal rate (the rate that is offered in the investment opportunity). In this case, the real rate of interest would be 6% (10% - 4%). Therefore, the best choice is C) 5.8%, which is the closest answer option to 6%.

If the Current Inflation Rate Is 4% and You Have