Question

# What would you expect the nominal rate of interest to be if the real rate is...

What would you expect the nominal rate of interest to be if the real rate is 5.0 percent and the expected inflation rate is 3.0 ​percent? The nominal rate of interest would be nothing​%. ​(Round to two decimal​ places.)

HI,

Here real rate r = 5%

inflation i = 3%

nominal rate R=?

as per fisher equation

(1+R) = (1+i)(1+r)

1+R = (1+3%)(1+5%)

1+R = 1.03*1.05

R = 8.15%

Hence nominal rate is 8.15%

Thanks

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