If the real rate of return is 0 percent and the inflation rate is 3 percent, the nominal interest rate is:
A) 0 percent.
B) 3 percent.
C) −3 percent.
D) 6 percent.

Question

Quizplus · Accepted Answer

The nominal interest rate is equal to the real rate of return plus the inflation rate. Therefore, if the real rate of return is 0 percent and the inflation rate is 3 percent, the nominal interest rate is 0% + 3% = 3%. Therefore, the correct answer is B) 3 percent.

If the Real Rate of Return Is 0 Percent and the Inflation