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Sagot :
Given an expected inflation premium of 1.45%
A real rate of interest of 4.34%,
Nominal interest rate stands 5.8529%
What stands the nominal interest rate?
The calculation of the nominal interest rate is shown
Nominal interest rate = (1 + Inflation premium) × (1 + Real rate of interest) - 1
= (1 + 1.45%) × (1 + 4.34%)- 1
= (1 + 0.0145) × (1 + 0.0434) - 1
= 1.0145 × 1.0434 - 1
= 1.058529 - 1
= 0.058529
or
= 5.8529%
What is the distinction between real interest rate and nominal interest rate?
Interest rates can be represented in nominal or real terms. A nominal interest rate equals the real interest rate plus a projected rate of inflation. A real interest rate mirrors the true worth of funds to the borrower and the actual yield to the lender or to an investor.
To learn more about Nominal interest rate, refer
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