If a bank advertises 3 percent interest for a checking account and the anticipated rate of inflation is 3.5 percent

Question

Quizplus · Accepted Answer

The real rate of interest is calculated by subtracting the anticipated rate of inflation from the advertised interest rate. Therefore, the real rate of interest earned on the checking account is -0.5% (3% - 3.5% = -0.5%). This means that the account's interest rate is lower than the rate of inflation, resulting in a negative real rate of return.

If a Bank Advertises 3 Percent Interest for a Checking