The nominal interest rate is 8 percent and the inflation rate is 3 percent. What is the real interest rate?
| a. |
8 percent |
|
| b. |
2 percent |
|
| c. |
11 percent |
|
| d. |
5 percent |
Real interest rate = Nominal rate - Real interest rate
Real Interest = 8 - 3
Real interest rate is 5%. the answer is "D".
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