If the real rate of return is 2 percent and the inflation rate is 0 percent, the nominal interest rate is:
A) 2 percent.
B) 0 percent.
C) 4 percent.
D) −2 percent.

Question

Quizplus · Accepted Answer

The nominal interest rate is equal to the real rate of return plus the inflation rate. Since the inflation rate is 0 percent, the nominal interest rate is equal to the real rate of return, which is 2 percent. Therefore, the correct answer is A) 2 percent.

If the Real Rate of Return Is 2 Percent and the Inflation