The nominal rate of interest on a bond is 8% and the expected inflation premium is 4%.This results in an approximate real rate of interest of 4% on the bond.

Name: The nominal rate of interest on a bond is 8% and the expected inflation premium is 4%.This results in an approximate real rate of interest of 4% on the bond.
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The real rate of interest can be computed as: (1 + nominal rate) / (1 + inflation premium) - 1. Plugging in the values, we get (1.08) / (1.04) - 1 = 0.04 or 4%.

The Nominal Rate of Interest on a Bond Is 8