To obtain an approximate estimate of the real interest rate,one must _________ the __________ the nominal risk-free rate.
A) add; default premium to the
B) subtract; default premium from the
C) add; expected inflation to
D) subtract; expected inflation from

Question

Quizplus · Accepted Answer

To obtain the real interest rate, we need to adjust the nominal risk-free rate for expected inflation. Therefore, we need to subtract expected inflation from the nominal risk-free rate to get the real interest rate.

To Obtain an Approximate Estimate of the Real Interest Rate,one