You open a savings account that pays 1.67% interest a year. What is your real rate of return if the actual inflation rate is 1.67%?
A)0%
B)-1.75%
C)1.67%
D)3.34%

Question

Quizplus · Accepted Answer

The real rate of return is calculated by adjusting the nominal rate of return (interest rate) for inflation. If both the interest rate and inflation rate are 1.67%, the real rate of return is effectively 0% because the purchasing power of the interest earned is exactly offset by the inflation.

You Open a Savings Account That Pays 1