If you borrow money at a 9% nominal rate and the inflation rate is 2%,what is the real interest rate on the loan?
A) 9.0%
B) 11.0%
C) 7.0%
D) 2.0%
E) 4.5%

Question

Quizplus · Accepted Answer

The real interest rate is the nominal interest rate minus the inflation rate, so:
Real interest rate = Nominal interest rate - Inflation rate
Real interest rate = 9% - 2%
Real Interest rate = 7%
Therefore, the answer is C) 7.0%.

If You Borrow Money at a 9% Nominal Rate and the Inflation