If a person has money invested at 9 percent and the rate of inflation is 5 percent, how much return are they actually making on their investment?

1. An index determined by measuring the price of standard goods brought by urban consumers.

2. Producers raise prices to meet increased cost.

3. Demand-pull theory.

4. It rises

5. 4 percent.

4%

Explanation:

It is given that a person has money invested at 9 percent and the rate of inflation is 5 percent.

We need to find the actual interest rate.

Real interest rate = Rate of interest - Rate of inflation

Substitute the given values in the above formula to find the actual interest rate.

Real interest rate = 9% - 5%

Real interest rate = 4%

Therefore, the real interest rate on their investment is 4%.