Question

Suppose you were borrowing money to buy a car. Consider the following situations. Situation​ 1: Suppose the interest rate on your car loan is 18.0018.00 percent and the inflation rate is 17.0017.00 percent. Calculate the real interest rate. nothing​%. ​(Enter your response as a percentage rounded to two decimal​ places.)

Answer 1

Answer:

1.00%

Explanation:

Given that

Interest rate = 18.00%

Inflation rate = 17.00%

Recall that

Real interest rate = interest rate (nominal) - inflation rate

Therefore,

Real interest rate = 18.00 - 17.00

= 1.00%