Question
What would be the real rate of interest If the money
discount rate is 19% and Inflation is 12%Solution
Nominal rate or money discount rate + 1 = (1 + Inflation Rate) * (1 + Real Rate) Thus, Real rate = (1+ Money rate)/ (1+ inflation rate) - 1 = (1+ 19%)/ (1+12%) -1 = 1.19% = 6.25%
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