Question

The nominal rate of return is 8 the real rate of return is 3 calculate the rate of inflation

Answer 1

Answer:

According to the Fischer Equation,

Nominal interest rate = Real interest rate + the expected inflation rate.

So,

the Inflation rate = Nominal interest rate - real interest rate.

It is given in the question as Nominal rate = 8%

Real rate = 3%.

Inflation rate = 8% - 3% = 5%

So, the inflation rate should be 5%.(Ans)

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Answer 2

Answer:

According to the Fischer Equation,

Nominal interest rate = Real interest rate + the expected inflation rate.

So,

the Inflation rate = Nominal interest rate - real interest rate.

It is given in the question as Nominal rate = 8%

Real rate = 3%.

Inflation rate = 8% - 3% = 5%

So, the inflation rate should be 5%.(Ans)