Question

If the nominal interest rate is 6 percent and the rate of inflation is 10 percent, then the real interest rate is A. -16 percent. B. 4 percent. C. -4 percent. D. 16 percent.

Answer 1

Answer: C. -4 percent

Step-by-step explanation:

Nominal interest rate is the interest rate before taking inflation into account.

Real interest rate takes the inflation rate into account.

The equation that links all three values is

nominal rate - inflation rate = real rate

6 - 10 = -4

-4 percent