the expected inflation rate is 5% and the real required return is 6%, then the Fisher effect says that the nominal interest rate should be
A) 1%
B) 11.3%
C) 11%
D) 6%

Question

Quizplus · Accepted Answer

According to the Fisher effect, the nominal interest rate is equal to the sum of the expected inflation rate and the real required return. Therefore, nominal interest rate = 5% + 6% = 11%. Choice B is the closest option to this value.

The Expected Inflation Rate Is 5% and the Real Required