Nominal rate of interest is equal to the sum of the real rate of interest plus an inflation premium plus a risk premium.

Question

Quizplus · Accepted Answer

This is the formula for determining the nominal rate of interest, where it is equal to the real rate of interest (the rate adjusted for inflation) plus an inflation premium (to account for future inflation expectations) plus a risk premium (to account for the risk associated with the investment).

Nominal Rate of Interest Is Equal to the Sum of the Real