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If the rate of inflation is 5%, what nominal interest rate is necessary for you to...

If the rate of inflation is 5%, what nominal interest rate is necessary for you to earn a 3% real interest rate on your inves

If the rate of inflation is 5%, what nominal interest rate is necessary for you to earn a 3% real interest rate on your investment? The nominal interest rate is %. (Round to two decimal places.)
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Answer #1

Nominal Interest rate = [(1+Real interest rate) * (1+Inflation rate) - 1

Nominal Interest rate = |(1+0.03) *(1+0.05) - 1

Nominal Interest rate = 1.0815 – 1

Nominal Interest rate= 0.0815

Nominal Interest rate = 8.15%

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.

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