Given a nominal interest rate of 6.75% and a real rate of return of 4%,what is the expected rate of inflation?

A) $ 1.67 \% $
B) $ 2.14 \% $
C) $ 2.26 \% $
D) $ 2.64 \% $

Name: Given a nominal interest rate of 6.75% and a real rate of return of 4%,what is the expected rate of inflation? A) $ 1.67 \% $ B) $ 2.14 \% $ C) $ 2.26 \% $ D) $ 2.64 \% $
Brand: Quizplus
Rating: 4.7 (38 reviews)

Question

Given a nominal interest rate of 6.75% and a real rate of return of 4%,what is the expected rate of inflation?

A) $ 1.67 \% $
B) $ 2.14 \% $
C) $ 2.26 \% $
D) $ 2.64 \% $

Quizplus · Accepted Answer

Rearranging equation 12.7,we can calculate the expected rate of inflation as follows:

Given a Nominal Interest Rate of 6 1.67% 1.67 \% 1.67%

Given a Nominal Interest Rate of 6 $1.67 \%$