If inflation were running at 15 percent and insurance companies were stuck with old policies that promised to lend money against cash value at 5 percent, then the real interest rate that these companies would receive on those loans is

Question

Quizplus · Accepted Answer

The real interest rate can be calculated by subtracting the inflation rate from the nominal interest rate. In this case, the nominal interest rate is 5 percent and the inflation rate is 15 percent. Therefore, the real interest rate is 5% - 15% = -10%.

If Inflation Were Running at 15 Percent and Insurance Companies