The real rate of interest is 3% and inflation is 4%.What is the nominal rate of interest?
A)3%
B)1.00%
C)7.12%
D)-1.00%

Name: The real rate of interest is 3% and inflation is 4%.What is the nominal rate of interest? A)3% B)1.00% C)7.12% D)-1.00%
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Question

Quizplus · Accepted Answer

To find the nominal rate of interest, we add the real rate and inflation rate. Therefore, nominal rate = real rate + inflation rate
Nominal rate = 3% + 4% = 7%. Therefore, the correct option is C) 7.12% as it is the closest to 7%.

The Real Rate of Interest Is 3% and Inflation Is