Question

If the anticipated inflation rate is 2 percent and the nominal interest rate is 6 percent, the real interest rate will be:

Answer 1

Answer:

Real interest rate= 0.04 = 4%

Explanation:

Giving the following information:

Inflation rate= 2%

Nominal interest rate= 6%

To calculate the real interest rate, we need to use the following formula:

Real interest rate= nominal interest rate - inflation rate

Real interest rate= 0.06 - 0.02

Real interest rate= 0.04 = 4%