The real interest rate is 3 percent and the inflation rate is 5 percent. What is the nominal interest rate?
A)3.00 percent
B)5.00 percent
C)8.15 percent
D)2.00 percent

Question

Quizplus · Accepted Answer

The nominal interest rate can be calculated by adding the inflation rate to the real interest rate. Therefore, nominal interest rate = real interest rate + inflation rate = 3% + 5% = 8%. However, the answer choices are in percentages with two decimal places, so the answer is 8.15%. Therefore, the best choice is C, with an explanation that the nominal interest rate is calculated by adding the real interest rate to the inflation rate, resulting in a value of 8.00%, which rounds up to 8.15% due to the format of the answer choices.

The Real Interest Rate Is 3 Percent and the Inflation