If the bank posts a nominal interest rate of seven per cent per year and the inflation rate is four per cent per year, then the real interest rate is:
A)minus three per cent
B)three per cent
C)four per cent
D)11 per cent

Question

Quizplus · Accepted Answer

To calculate the real interest rate, we subtract the inflation rate from the nominal interest rate. Therefore, real interest rate = nominal interest rate - inflation rate = 7% - 4% = 3%. Hence, the answer is option B.

If the Bank Posts a Nominal Interest Rate of Seven