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A real interest rate and a nominal interest rate are quite similar. The only real difference between the two interest rates are that a nominal interest rate include the cost of inflation where as the real interest rate does not.
In the long run the real interest rate is determined by?
the real interest rate equals nominal interest rate minus inflation rate. In the situation the inflation rate increase and the nominal interest rate remains unchanged, therefore the real interest rate must decrease.
The expected real interest rate.
Real interest rate = nominal interest rate- inflation rate. If a burger in 2007 is for $100 and if the same burger in 2008 is for $110 then Inflation rate is 10% for 2007 If interest rate in 2007 is 13% and in 2008 interest rate is 14% real interest would be only 14%-10% = 4% That is in real value the return on investment is only 4% because purchasing power of 10% is decreased because of inflation
A real interest rate and a nominal interest rate are quite similar. The only real difference between the two interest rates are that a nominal interest rate include the cost of inflation where as the real interest rate does not.
Nominal InterestA nominal interest rate is the interest rate that does not compensate for inflation. This is used in relation to "effective interest rate" or "real interest rate."" Real Interest Rate = Nominal Interest Rate - Inflation Rate " Improvement suggested by Palash Bagchi.
In the long run the real interest rate is determined by?
the real interest rate equals nominal interest rate minus inflation rate. In the situation the inflation rate increase and the nominal interest rate remains unchanged, therefore the real interest rate must decrease.
The expected real interest rate.
Real interest rate = nominal interest rate- inflation rate. If a burger in 2007 is for $100 and if the same burger in 2008 is for $110 then Inflation rate is 10% for 2007 If interest rate in 2007 is 13% and in 2008 interest rate is 14% real interest would be only 14%-10% = 4% That is in real value the return on investment is only 4% because purchasing power of 10% is decreased because of inflation
It is, essentially, a tax.
If the rate of inflation exceeds the nominal rate of return during the period in question, then the real rate of return can be negative.
No, nominal interest can never be a negative rate. If such an event occurred it would involve customers paying the banking, at which point it would be referred to as a fee rather than interest.
the real interest rate
The expected inflation rate is 11.51%
Risk-free interest is the rate of interest which exists when the expected risk of the economic transaction is zero. In most cases, the general interest rates in major banks of a country reflects the nominal interest rate, which is risk free. The real interest rate is simply the nominal interest rate minus the rate of inflation.