Question

the nominal interest rate is 7 percent and the expected inflation rate is 4 percent. the real interest rate is

Answer 1

2.88%

Step-by-step explanation:

According to the fisher equation :

(1 + Nominal interest ) = (1 + real interest) (1 + inflation rate)

(1.07) = (1.04) x (1 + real interest)

(1.07) / (1.04) = (1 + real interest)

1.028846

real interest rate = 2.88%