Lonnie lends Burt $15,000 in 2009. Burt repaid Lonnie $150 in real interest for the 1-year loan. Inflation that year was 1.5%. What nominal interest rate did Lonnie charge Burt?

Question

Quizplus · Accepted Answer

The real interest rate is the nominal interest rate minus the inflation rate. So, the nominal interest rate is the real interest rate plus the inflation rate. In this case, the real interest rate is $150, and the inflation rate is 1.5%. So, the nominal interest rate is $150 + 1.5% = 2.5%.

Lonnie Lends Burt $15,000 in 2009