If the inflation premium is 3% and the real interest on a loan is 4%, then the nominal interest rate is:
A) 1%
B) -1%
C) 7%

Name: If the inflation premium is 3% and the real interest on a loan is 4%, then the nominal interest rate is: A) 1% B) -1% C) 7%
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Question

Quizplus · Accepted Answer

The nominal interest rate is equal to the sum of the real interest rate and the inflation premium. 
Nominal interest rate = 4% + 3% = 7%. Therefore, the correct choice is C - 7%.

If the Inflation Premium Is 3% and the Real Interest