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vesna_86 [32]
3 years ago
14

If the nominal rate of interest is 4.35 percent and the expected rate of inflation is 1.63 percent, what is the real rate of int

erest? (Round percentage answer to 3 decimal places, e.g. 52.754%.)
Business
1 answer:
Bond [772]3 years ago
7 0

Answer:

Real rate interest = 2.675

Explanation:

given data

nominal rate of interest = 4.35 % = 0.0435

rate of inflation = 1.63 % = 0.0163

to find out

what is the real rate of interest

solution

we get here real rate of interest that is express as

Real rate interest = (1 + nominal rate) ÷ (1 + inflation rate) - 1     ...................1

put here value we get

Real rate interest = \frac{1+0.0435}{1+0.0163} - 1

Real rate interest = 1.026763751 - 1

Real rate interest = 0.026763751

Real rate interest = 2.675

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