If you want to earn a real interest rate of 3% on money you lend, and you expect that inflation will be 2%, what nominal rate of interest will you charge?
A)1%
B)5%
C)6%
D)9%
E)12%

Question

Quizplus · Accepted Answer

To earn a real interest rate of 3% with an expected inflation rate of 2%, you use the formula: nominal interest rate = real interest rate + inflation rate. Therefore, 3% + 2% = 5%.

If You Want to Earn a Real Interest Rate of 3