What is the real rate of interest if the nominal rate of interest is 10 percent and the rate of inflation is 4 percent?

Question

Quizplus · Accepted Answer

The real rate of interest is the increase in purchasing power that an investor gets after adjusting for inflation. In this case, the nominal rate of interest is 10 percent, but the rate of inflation is 4 percent. Therefore, the real rate of interest will be:

Real rate of interest = Nominal rate of interest - Inflation rate
Real rate of interest = 10% - 4%
Real rate of interest = 6%

Hence, the answer is A) 6 percent.

What Is the Real Rate of Interest If the Nominal