Suppose that, in March 2018, you had deposited $1000 in a savings account with an interest...
Suppose that, in March 2018, you had deposited $1000 in a savings account with an interest rate of 2.2% (and left it there until March of this year) and the bank paid an interest rate of 2% on that savings. What nominal interest rate did you earn? What real interest rate did you earn? Was it a good decision on your part, why or why not?
Homework Answers
Nominal interest rate is 1000 ×2.2% = $22
Real interest rate is 1000 × 2% = $20
(Being $2 as the inflation in the market)
No it ain't a good decision as the rate of interest on which we should get $22 , we are receiving $20 . Hence there's no benefit in the the money recieved.
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