If the average price of goods rose by 10 percent in a year and John received a 12 percent interest rate in his savings account, what was the nominal interest rate John earned?
Question
If the average price of goods rose by 10 percent in a year and John received a 12 percent interest rate in his savings account, what was the nominal interest rate John earned?
Solution
The nominal interest rate John earned is the interest rate he received in his savings account, which is 12 percent. The nominal interest rate does not take into account the inflation rate or the average price increase of goods. Therefore, even though the average price of goods rose by 10 percent, it does not affect the nominal interest rate. So, the nominal interest rate John earned is 12 percent.
Similar Questions
Amanda invested $9000 in a fund for 5 years and was paid simple interest. The total interest that she received on the investment was $1800. As a percentage, what was the annual interest rate of her investment?
An investment had a nominal return of 9.9 percent last year. The inflation rate was 3.1 percent. What was the real return on the investment?
Ronald saved a total amount R165 000.00. Every year, he deposited R 28 500.00 into an account earning 6.04% interest per year. How long, rounded to one decimal place did it take him to accumulate the total amount? A.3.0 yearsB.3.4 yearsC.5.1 yearsD.6.0 years
Andrew borrows $79,500 for 2 years and earns $10,017 of simple interest. Calculate the interest rate?
A man took a loan from a bank at the rate of 12% per annum at simple interest. After 3 years he had to pay 5,400 as interest. The principal amount borrowed by him was?
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.