Question

If the cost of money is 10% and the inflation rate is 6%, what interes rate will take care of the cost of money and inflation?

Answer 1

Answer:

Explana

To find the real interest rate, we take the nominal interest rate and subtract the inflation rate. For example, if a loan has a 12 percent interest rate and the inflation rate is 8 percent, then the real return on that loan is 4 percent. In calculating the real interest rate, we used the actual inflation rate.

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