If the inflation rate is 6 percent,what is the real interest rate paid on a loan bearing 7 percent nominal interest per year?
A)1 percent
B)6 percent
C)7 percent
D)13 percent

Question

Quizplus · Accepted Answer

The real interest rate is the nominal interest rate minus the inflation rate. So, the real interest rate in this case would be 7 percent - 6 percent = 1 percent. Therefore, the best choice is A) 1 percent.

If the Inflation Rate Is 6 Percent,what Is the Real