If the nominal interest rate is 8% and the risk-free rate is 3%, the expected inflation rate must be:
A) 3%
B) 5%
C) 11%
D) 13%

Name: If the nominal interest rate is 8% and the risk-free rate is 3%, the expected inflation rate must be: A) 3% B) 5% C) 11% D) 13%
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Question

Quizplus · Accepted Answer

The expected inflation rate can be calculated as the difference between the nominal interest rate and the risk-free rate. Therefore, the expected inflation rate is 8% - 3% = 5%. Option B) is the correct answer.

If the Nominal Interest Rate Is 8% and the Risk-Free