The inflation rate is 3% and stable. If a bank wants to earn a real interest rate of 4%, what interest rate will Hua Xing need to pay on the car loan that she is requesting?
A) -1%
B) 1%
C) 7%
D) 12%

Question

Quizplus · Accepted Answer

To earn a real interest rate of 4% when the inflation rate is 3%, the nominal interest rate needs to be the sum of the real interest rate and the inflation rate, which is 4% + 3% = 7%.

The Inflation Rate Is 3% and Stable