Veronica has received a $3,000 gift and is looking for a bank to start a savings account. Which option would be the best for her if the current inflation rate is 2.5%?

A) A bank that offers 4% interest

B) A bank that offers 3% interest

C) A bank that offers 2.5% interest

D) A bank that offers 3.5% interest

Question

Rapunzel

Social Studies

18 September, 17:18

Veronica has received a $3,000 gift and is looking for a bank to start a savings account. Which option would be the best for her if the current inflation rate is 2.5%?

A) A bank that offers 4% interest

B) A bank that offers 3% interest

C) A bank that offers 2.5% interest

D) A bank that offers 3.5% interest

+1

Answers (1)

Know the Answer?

Emilia Choi · Answer 1

A

Step-by-step explanation:

You are looking for the highest real interest rate, which is the nominal rate minus the inflation rate. With that being said, the lowest interest rate is 2.5%, which wouldn't make her anything. However, the 4% interest rate yields 1.5% real interest, making it the best option.