The consumer price index was 200 in 2012 and 208 in 2013.The nominal interest rate during this period was 9 percent.What was the real interest rate during this period?
A)5.00 percent
B)1.00 percent
C)5.15 percent
D)13.00 percent

Question

Quizplus · Accepted Answer

The real interest rate is the nominal interest rate minus the inflation rate. The inflation rate is the percentage change in the CPI. In this case, the inflation rate is (208-200)/200 = 4%. The real interest rate is therefore 9% - 4% = 5%.

The Consumer Price Index Was 200 in 2012 and 208