if the nominal interest rate is 10 percent and the inflation rate is 3 percent, then the real interest rate…

if the nominal interest rate is 10 percent and the inflation rate is 3 percent, then the real interest rate equals\nmultiple choice\n3 percent.\n7 percent.\n10 percent.\n13 percent.

if the nominal interest rate is 10 percent and the inflation rate is 3 percent, then the real interest rate equals\nmultiple choice\n3 percent.\n7 percent.\n10 percent.\n13 percent.

Answer

Explanation:

Step1: Recall the Fisher - equation approximation

The approximate Fisher equation is $r = i-\pi$, where $r$ is the real - interest rate, $i$ is the nominal interest rate, and $\pi$ is the inflation rate.

Step2: Substitute the given values

Given $i = 10%$ and $\pi=3%$, we substitute into the formula: $r=10% - 3%$.

Step3: Calculate the real - interest rate

$r = 7%$.

Answer:

B. 7 percent