What is the difference between nominal and real interest rates

Asked by admin @ in Business viewed by 318 People

The difference between the nominal interest rate and the real interest rate is

A. the real interest rate is the stated interest rate whereas the nominal interest rate is the real interest rate minus the inflation rate.
B. the nominal interest rate is the stated interest rate whereas the real interest rate is the nominal interest rate divided by the inflation rate.
C. the nominal interest rate is the stated interest rate whereas the real interest rate is the nominal interest rate plus the inflation rate.
D. the nominal interest rate is the stated interest rate whereas the real interest rate is the nominal interest rate minus the inflation rate.

Answered by admin @


Answer: the correct answer is letter D. the nominal interest rate is the stated interest rate whereas the real interest rate is the nominal interest rate minus the inflation rate.

Explanation: in financial maths when you speak about "real" rates you should consider the inflation impact.


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