Calculate the Real Rate of Interest If the Nominal Rate

question 79

Multiple Choice

Calculate the real rate of interest if the nominal rate of interest is 8.65% and the inflation rate is 2.24%.

• A)9.50%
• B)8.49%
• C)7.38%
• D)6.27%

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Definitions:

Household Debt/income Ratio

A measure comparing the debt level of a household to its income, indicating financial health and borrowing capacity.

Interest Payments

The regular required payments made by a borrower to a lender for the use of borrowed money, usually a portion of the loan amount.

Interest-only Loans

Loans for which the borrower pays only the interest on the principal balance, with the principal amount remaining unchanged over a set term.

Variable Rate Mortgages

Mortgages with interest rates that can fluctuate over time based on underlying benchmark interest rates or market conditions.