What is the nominal interest rate

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1. If the rate of inflation is 4 percent and the real interest rate is 3 percent, what is the nominal interest rate?

2. The annual rate of inflation averaged 2 percent during the past decade, but borrowers and lenders anticipate that the price level will rise at a rate of 3 percent next year. The current nominal interest rate is 7 percent. What is the real rate of interest?

3. In 2010, the cost of a market basket of goods was $2,000. In 2012, the cost of the same market basket of goods was $2,100. Use the price index formula to calculate the price index for 2012 if 2010 is the base year?

Reference no: EM132484444

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