Which of the following statements about nominal interest and real interest is true?
A) Nominal interest is a yearly rate and real interest is a monthly rate.
B) Nominal interest does not adjust for inflation, whereas real interest does.
C) Nominal interest is what the lender receives and real interest is what the borrower pays.
D) Nominal interest and real interest are two ways of saying the same thing.

Question

Quizplus · Accepted Answer

Nominal interest does not adjust for inflation, whereas real interest does. Real interest is the nominal interest rate adjusted for the effects of inflation. It provides a more accurate picture of the true cost of borrowing or the true return on investment.

Which of the Following Statements About Nominal Interest and Real