If the nominal interest rate is 10 percent and the inflation rate is 4 percent, then the real interest rate is
A)14 percent.
B)6 percent.
C)2.5 percent.
D).4 percent.

Question

Quizplus · Accepted Answer

The real interest rate can be calculated by subtracting the inflation rate from the nominal interest rate.

Real interest rate = Nominal interest rate - inflation rate

Real interest rate = 10% - 4% = 6%

Therefore, the real interest rate is 6 percent, which is option B.

If the Nominal Interest Rate Is 10 Percent and the Inflation