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Free_Kalibri [48]
2 years ago
10

Michael has been saving his money and wants to invest it. After doing some research, he has decided to invest $20,000 into a Cer

tificate of Deposit. The interest rate on the CD is 3% with a term of five years, and the interest is paid out annually. Based on recent inflation, Michael is planning on an annual inflation rate of 2%. Which statement best explains the interest rates related to this CD? The nominal interest rate is 3 percent, while the real interest rate is 2 percent. The nominal interest rate is 3 percent, while the real interest rate is 1 percent. The nominal interest rate is 1 percent, while the real interest rate is 2 percent. The nominal interest rate is 2 percent, while the real interest rate is 4 percent.
Business
2 answers:
victus00 [196]2 years ago
8 0

Answer: the next one after b is A on the assignment

$200

Explanation:

MissTica2 years ago
3 0

Since he is planning on an annual inflation rate of 2%., the statement that explains the interest rates relating to the CD is nominal interest rate is 3% while the real interest rate is 1%.

A real interest rate refers to the nominal rate which is adjusted for inflation.

  • We are given that Interest (nominal rate) is 3% and planned Inflation rate = 2%

  • Real interest rate = 1% (Nominal rate - inflation rate)

Hence, the statement that explains the interest rates relating to the CD is nominal interest rate is 3% while the real interest rate is 1%.

Therefore, the Option B is correct.

Read more about Real interest rate

<em>brainly.com/question/25816355</em>

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