If the nominal interest rate is 12% p.a.and the inflation rate is expected to be 5% p.a. ,what is the real rate of interest?
A)106.7%
B)6.7%
C)7%
D)8.2%

Question

Quizplus · Accepted Answer

The real interest rate can be calculated using the formula: Real Interest Rate = ((1 + Nominal Interest Rate) / (1 + Inflation Rate)) - 1. Plugging in the given values: ((1 + 0.12) / (1 + 0.05)) - 1 = 0.067, or 6.7%.

If the Nominal Interest Rate Is 12% P