27) Answer the attached question please according to attached question: Question

Question

27) Answer the attached question please according to attached question:

Question: what is Sally's earned a real interest rate precent per year?

Question 27 of 50 This Question: pts This Testy 300 pts hme Rematningt 00 Sally worked hard all year and put her savings into a mutual fand that pad a nominal interest rate of 3 percent a year Drwing the year, the CPI moreased from 190 to 195 What was the real mterest rate that Sally earned? Sally earned a real interest rate of percent per year Answer to 1 decimal place >> if your answer is negative, include a minus sign If your answer is positivwe, do not inckude a plus sign

Explanation / Answer

Real interest rate = Nominal interest rate - Inflation rate

Inflation rate = [{CPIn - CPI(n-1)}/ CPI(n-1)] = [(195 - 190)/190] X 100 = 500/190 = 2.63%

So, real interest rate = 3% - 2.63% = 0.36% = 0.4%

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