Suppose the nominal interest rate charged is 5 percent and the expected inflation rate is 2 percent.Which of the following is the expected real interest rate?
A) 2 percent
B) 5 percent
C) 7 percent
D) -3 percent
E) 3 percent

Question

Quizplus · Accepted Answer

The expected real interest rate can be calculated as the nominal interest rate minus the expected inflation rate. Therefore, the expected real interest rate in this scenario would be 5 percent - 2 percent = 3 percent. So, option E is the correct answer.

Suppose the Nominal Interest Rate Charged Is 5 Percent and the Expected