If the current inflation rate is 5%, then the nominal rate necessary for you to earn an 8% real interest rate on your investment is closest to:

Question

Quizplus · Accepted Answer

The nominal rate necessary to earn a real interest rate of 8% with a 5% inflation rate can be calculated using the Fisher equation: (1 + nominal rate) = (1 + real rate) * (1 + inflation rate). Plugging in the values: (1 + nominal rate) = (1 + 0.08) * (1 + 0.05) = 1.08 * 1.05 = 1.134. Therefore, the nominal rate = 13.4%.

If the Current Inflation Rate Is 5%, Then the Nominal