How is the nominal rate of interest calculated?
A)by adding a nominal sum to the prime interest rate
B)by adding the expected rate of inflation to the real interest rate
C)by adding the inflation rate to the unemployment rate
D)by adding the increase in the Consumer Price Index to the rate of interest

Question

Quizplus · Accepted Answer

The nominal rate of interest is calculated by adding the expected rate of inflation to the real interest rate. Real interest rate is the interest rate adjusted for inflation while the expected rate of inflation is the rate at which the general level of prices is expected to increase in the future. Therefore, adding these two gives the nominal rate of interest.

How Is the Nominal Rate of Interest Calculated