Answered

Westonci.ca is the ultimate Q&A platform, offering detailed and reliable answers from a knowledgeable community. Discover in-depth solutions to your questions from a wide range of experts on our user-friendly Q&A platform. Connect with a community of professionals ready to help you find accurate solutions to your questions quickly and efficiently.

The current inflation rate is [tex]2 \%[/tex], and the nominal interest rate on a savings account is [tex]1.3 \%[/tex]. What is the real interest rate on the savings account?

Select the correct answer.

A. [tex]-2.0 \%[/tex]
B. [tex]-0.7 \%[/tex]
C. [tex]0.7 \%[/tex]
D. [tex]1.3 \%[/tex]

Sagot :

GinnyAnswer
To determine the real interest rate on a savings account, we need to take into account both the nominal interest rate and the inflation rate. The real interest rate is the nominal interest rate adjusted for inflation. The formula to find the real interest rate is:

[tex]\[ \text{Real Interest Rate} = \text{Nominal Interest Rate} - \text{Inflation Rate} \][/tex]

Given:
- The nominal interest rate is [tex]\( 1.3 \% \)[/tex]
- The inflation rate is [tex]\( 2.0 \% \)[/tex]

We substitute these values into the formula:

[tex]\[ \text{Real Interest Rate} = 1.3 \% - 2.0 \% \][/tex]

Performing the subtraction:

[tex]\[ \text{Real Interest Rate} = -0.7 \% \][/tex]

So, the real interest rate on the savings account is [tex]\( -0.7 \% \)[/tex].

The correct answer is:
[tex]\[ -0.7 \% \][/tex]
Thanks for using our platform. We aim to provide accurate and up-to-date answers to all your queries. Come back soon. We appreciate your time. Please come back anytime for the latest information and answers to your questions. Thank you for visiting Westonci.ca, your go-to source for reliable answers. Come back soon for more expert insights.