expected inflation is 20% and the real required return is 10%, then the Fisher effect says that the nominal interest rate should be exactly
A) 30%
B) 32%
C) 22%
D) 12%

Question

Quizplus · Accepted Answer

The Fisher effect formula is: nominal interest rate = real interest rate + expected inflation + (real interest rate * expected inflation). Here, it is 10% + 20% + (10% * 20%) = 32%.

Expected Inflation Is 20% and the Real Required Return Is