Which of the following correctly identifies the Fisher equation?
A) r = (1 + R) / (1 + i)
B) r = R / (1 + i)
C) 1 + r = R / (1 + i)
D) 1 + r = (1 + R) / (1 + i)

Question

Quizplus · Accepted Answer

The Fisher equation is 1 + r = (1 + R) / (1 + i), which relates nominal interest rates (r) to real interest rates (R) and inflation rates (i). This equation shows that the nominal interest rate includes a compensation for inflation, so the real interest rate can be calculated by adjusting for inflation.

Which of the Following Correctly Identifies the Fisher Equation