Which one of the following best describes a real interest rate?
A)current rate on a U.S. Treasury bill
B)nominal rate minus the risk premium on an individual security
C)market return minus the risk-free rate
D)nominal rate minus inflation
E)historical rate rather than a projected rate

Question

Quizplus · Accepted Answer

A real interest rate is the nominal interest rate adjusted for inflation. Therefore, option D, which subtracts inflation from the nominal interest rate, is the best description of a real interest rate. The other options describe different rates, such as the current rate on a U.S. Treasury bill or a market return, but do not adjust for inflation.

Which One of the Following Best Describes a Real Interest