question 1 (multiple choice worth 5 points) (02.04 mc) oscar has deposited $4,000 in a savings account at…

question 1 (multiple choice worth 5 points) (02.04 mc) oscar has deposited $4,000 in a savings account at 1.5% interest. what is his real interest rate if the current inflation rate is 2.5%? 3 - 0.6% 3.75% 4% 5 - 1%

question 1 (multiple choice worth 5 points) (02.04 mc) oscar has deposited $4,000 in a savings account at 1.5% interest. what is his real interest rate if the current inflation rate is 2.5%? 3 - 0.6% 3.75% 4% 5 - 1%

Answer

Explanation:

Step1: Recall real - interest rate formula

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

Step2: Identify values

The nominal interest rate $i = 1.5%=0.015$ and the inflation rate $\pi = 2.5% = 0.025$.

Step3: Calculate real interest rate

$r=0.015 - 0.025=- 0.01=-1%$

Answer:

$-1%$