If the expected inflation rate was 2.5%,the expected real interest rate was 4.0%,and the real interest rate turned out to be 5.1%,then the nominal interest rate equals
A)1)4%.
B)1)5%.
C)2)6%.
D)6)5%.

Question

Quizplus · Accepted Answer

The nominal interest rate can be calculated using the Fisher equation, which is: nominal interest rate = real interest rate + inflation rate. Given the real interest rate turned out to be 5.1% and the expected inflation rate was 2.5%, the nominal interest rate equals 5.1% + 2.5% = 7.6%. However, none of the provided options match this calculation, suggesting a possible mistake in the question or answer choices. Based on the provided choices, the closest explanation is an understanding error, but strictly according to the given data and standard calculations, none of the options correctly match the calculated nominal interest rate of 7.6%.

If the Expected Inflation Rate Was 2