What is the real interest rate given a nominal rate of 8% and an inflation rate of 4.5%?
A)8.0%
B)3.3%
C)4.9%
D)4.5%

Question

Quizplus · Accepted Answer

The real interest rate is calculated by subtracting the inflation rate from the nominal interest rate. Therefore, the real interest rate in this scenario is 8% - 4.5% = 3.5%. This means that the purchasing power of the money invested has increased by 3.5%. Therefore, the best choice is B.

What Is the Real Interest Rate Given a Nominal Rate