If the nominal interest rate is 8 percent while the inflation rate is 10 percent, then the actual rate of return for lenders is
A) 18 percent.
B) 10 percent.
C) 2 percent.
D) -2 percent.

Question

Quizplus · Accepted Answer

The actual rate of return is the nominal interest rate minus the inflation rate. Therefore, the actual rate of return in this case is -2 percent (8 percent minus 10 percent).

If the Nominal Interest Rate Is 8 Percent While the Inflation