If Glenda puts money in a bank account that offers a 1% annual rate, and inflation rate over the year is 3%, what is Glenda's real (inflation-adjusted) return?

Name: If Glenda puts money in a bank account that offers a 1% annual rate, and inflation rate over the year is 3%, what is Glenda's real (inflation-adjusted) return?
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Question

Quizplus · Accepted Answer

Real Rate = Nominal Rate - Inflation Rate = 1% - 3% = -2% Or more precisely real rate = [(1 + nominal rate) / (1 - inflation rate)] - 1 = [(1.01)/(1.03)] - 1 = -0.0194 or - 1.94%

If Glenda Puts Money in a Bank Account That Offers