Real Rate of Return
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If the nominal interest rate is 7.5% and the expected inflation rate is 4%, what is the real rate of interest?
a) Less than 3.5%
b) Exactly 3.5%
c) Between 3.5% and 3.7%
d) Over 3.7% but less than 11.5%
e) Exactly 11.5%
f) More than 11.5%
g) The real rate of interest cannot be determined from the information provided.
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Solution Summary
The solution computes the real rate of return with given nominal and expected inflation rate.
Solution Preview
Nominal interest is composed of the real interest rate plus inflation, among other factors. A ...
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