Register
5. What is the real rate of interest for an account that offers a 12% nominal rate of return when the rate of inflation is 6% annually
232k views
2 votes
5. What is the real rate of interest for an account that offers a 12% nominal rate of return when the rate of inflation is 6% annually

User Theo Cerutti
by
4.8k points

1 Answer

0 votes

Answer:

Real interest rate= 0.06 = 6%

Step-by-step explanation:

Giving the following information:

Nominal interest rate= 12%

Inflation rate= 6%

The inflation rate provides the opposite effect on the interest rate. It decreases the purchasing power of an individual. To calculate the real interest rate, we need to deduct the inflation rate.

Real interest rate= 0.12 - 0.06= 0.06

User Xiting
by
4.6k points
Ask a Question
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

5.3m questions

6.9m answers

Other Questions

Decker Tires' free cash flow was just FCF0 = $1.32. Analysts expect the company's free cash flow to grow by 30% this year, by 10% in Year 2, and at a constant rate of 5% in Year 3 and thereafter. The WACC
For this question, assume that the expected rate of inflation is a function of the past year's inflation. Also, assume that the unemployment rate has been equal to the natural rate of unemployment for
Misk Co. purchased the following securities during 20X7 to be classified as held-to-maturity securities, trading securities, or available-for-sale securities: I. Debt securities bought and held for the
Risa has to work long hours and sometimes weekends, losing out on family time. Risa doesn't find her long hours overly stressful, but rather she sees it as her contribution to maintaining her family's
Bob and Tom are two criminals who have been arrested for burglary. The police put Tom and Bob in separate cells. They offer to let Bob go free if he confesses to the crime and testifies against Tom. Bob
Link Copied!