Question

If savers anticipate an inflation rate of 10 percent and require a real return of 5 percent, then savers will require an interest rates of _______ percent to be paid on their deposits.

Answer 1

In here, we can say that we are looking for the nominal interest rate. Given is the real interest rate which is 5% and the inflation rate of 10%. The nominal rate of interest is real interest rate plus the inflation rate. Savers will now require an interest rate of 15%