Question

The outstanding bonds of Winter Time Products provide a real rate of return of 3.00 percent. The current rate of inflation is 2.00 percent. What is the nominal rate of return on these bonds

Answer 1

The nominal rate of return on these bonds is 5%

Step-by-step explanation:

The Formula for the Real Rate of Return is

Real rate of return =Nominal interest rate - Inflation rate

So,

Nominal interest rate=Real rate of return+Inflation rate

Nominal interest rate=3%+2%

Nominal interest rate=5%