In January 2013, you can put your savings in a Bank of America account and be paid 2 percent per year. During 2013, suppose the inflation rate is 3.4 percent. In 2013 you earned a real interest rate of
A) 0.59 percent.
B) 6.8 percent.
C) 1.4 percent.
D) -1.4 percent.

Question

Quizplus · Accepted Answer

The real interest rate can be calculated using the formula: real interest rate = nominal interest rate - inflation rate. Here, it's 2% - 3.4% = -1.4%.

In January 2013, You Can Put Your Savings in a Bank