Homework Answers
| Nominal Interest Rate | 4% |
| Inflation rate | 1% |
| r = (i-g)/(1+g) | |
| Where, | |
| r = real interest rate | |
| i=nominal interest rate | |
| g= inflation rate | |
| = (0.04-0.01/ (1+0.01) | |
|
=2.97% =3% (rounded off) Correct Option : SECOND |
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