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23 December, 10:49

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.)

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  1. 23 December, 10:56
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    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%
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