If investors receive a 5.8% interest rate on their bank deposits, what real inte

Question

If investors receive a 5.8% interest rate on their bank deposits, what real interest rate will they earn if the inflation rate over the year is (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.):

  

If investors receive a 5.8% interest rate on their bank deposits, what real interest rate will they earn if the inflation rate over the year is (Leave no cells blank - be certain to enter "0" wherever required. Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.):

Explanation / Answer

(1+r) = (1+n)/(1+i)

where n = nominal rate of interest

i - inflation rate

r - Real rate

now please find below the Real interest rate calculation

it was calculated like

(1+.058)/(1+0.00) -1 = r

r = 0.058 or 5.8%

in second option

(1+.058)/(1+.028) -1 =r

r = 0.0292

r = 2.92%

and the third one

(1+.058)/(1+.058) -1 = r

r = 0

Please comment in case of any clarification required or query.

Inflation rate Nominal rate of int. Real Interest rate a 0 5.80% 5.80% b 2.80% 5.80% 2.92% c 5.80% 5.80% 0.00%

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