The difference between the nominal interest rate and the rate of inflation is:
A)the prime rate.
B)the real interest rate.
C)the discount rate.
D)coupon rate.

Question

The difference between the nominal interest rate and the rate of inflation is:
A)​the prime rate.
B)​the real interest rate.
C)​the discount rate.
D)​coupon rate.

Quizplus · Accepted Answer

The difference between the nominal interest rate and the rate of inflation is known as the real interest rate. This is because it reflects the actual purchasing power gained or lost by an investment after accounting for inflation. The prime rate, discount rate, and coupon rate are all specific interest rates used in different contexts, but they do not directly relate to the difference between nominal interest rates and inflation.

The Difference Between the Nominal Interest Rate and the Rate