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%

Question

Quizplus · Accepted Answer

To find the nominal interest rate when you want a real interest rate of 3% and expect inflation to be 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