If the inflation rate 23% and real rate is 12%, what is the nominal interest rate?...

Question

Question

If the inflation rate 23% and real rate is 12%, what is the nominal interest rate? A. 37.76% B. 38.2% C. 25.0% D. 35.0%

business finance

Answer 1

Answer #1

(1 + Nominal rate of return) = (1 + Real rate of return)(1 + Inflation rate)

(1 + Nominal rate of return) = (1 + 0.12)(1 + 0.23)

Nominal rate of return = [(1 + 0.12)(1 + 0.23)] - 1

Nominal rate of return = 0.3776 or 37.76%

Answer 2

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