In a particular year,the interest rate is 5% and the real rate of return is 3%.What is the rate of inflation for the same year?
A)2.06%
B)2.00%
C)1.94%
D)1.85%

Question

Quizplus · Accepted Answer

The equation for calculating nominal interest rate is:

nominal interest rate = real interest rate + inflation rate

Plugging in the given values, we get:

5% = 3% + inflation rate

Solving for inflation rate, we get:

inflation rate = 5% - 3% = 2%

Therefore, the rate of inflation for the same year is 2%, which corresponds to answer choice C.

In a Particular Year,the Interest Rate Is 5% and the Real