16% 00.56:35 1 16/17 Thys is a Numeric Entry question / It is worth 1 point / Yu

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16% 00.56:35 1 16/17 Thys is a Numeric Entry question / It is worth 1 point / Yuhwe10f 1 attempts remaning/There is no attempt penalty 11 Question (1point) 1st attempt You have just taken a job at a bank in the loans department. Your bank is worried about the current economic climate and its potential to limit the real rate of interest the bank will earn on new loans. Turming to you, the head of the department asks you to determine the proper nominal rate of interest to ensure a 4% real rate of interest. You say that you have to know that inflation will be. You are told that the current inflation rate is 3%. You suggest a nominal interest rate of

Explanation / Answer

nominal interest rate

=((1+4%)*(1+3%))-1

=7.12%

you can also show it as in simple method

nominal interest rate=4%+3%=7%

the above is the answer

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