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18 May, 05:07

The consumer price index was 200 in 2012 and 208 in 2013. the nominal interest rate during this period was 9 percent. what was the real interest rate during this period?

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  1. 18 May, 08:49
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    Given:

    CPI 2012 - 200

    CPI 2013 - 208

    Nominal interest rate: 9%

    1) CPI 2012 multiplied by (1 + nominal rate)

    200 x 1.09 = 218

    2) Product of #1 less CPI 2013

    218 - 208 = 10

    3) Difference divided by CPI 2012

    10 / 200 = 0.05

    4) Quotient multiplied by 100%

    0.05 x 100% = 5%

    The real interest rate during this period is 5%.
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