Question

If investors receive a 6.7% interest rate on their bank deposits, what real interest rate will they earn if the inflation rate over the year is:

Check my Work If investors receive a 6.7 % interest rate on their bank deposits, what real interest rate will they earn if the inflation rate over the year is: (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Real Interest Rate a. Zero % b. 3.7 % c. 6.7

Answer 1

Real interest rate=(1+nominal rate)/(1+inflation)-1

1.
=1.067/1-1=6.70%

2.
=1.067/1.037-1=2.89%

3.
=1.067/1.067-1=0.00%