Question

Of 20 >

Answer 1

Answer: 1.5%

Step-by-step explanation:

The Pure Interest Rate refers to the rate in a theoretical market where there is no risk as economic conditions can be predicted with certainty.

Sadly, uncertainty will always exist but there are rates that are close enough to the Pure interest rate such as US Government Security rates.

The United States has never defaulted on a debt payment in the modern era and as such is known to offer the least risky rates in the world. The rate on US Securities can therefore be considered as close as possible to the pure interest rate.

Given the rates in the question, the Pure Interest rate would be the 20-year Treasury bond rate of 1.5%.