Question

Anika’s savings account has a stated interest rate of 2.5%. After inflation, the real return on her savings account is 1%. What is the nominal interest rate on the account?

A.
-1%
B.
1%
C.
1.5%
D.
2.5%

Answer 1

Option D. 2.5%

Explanation:

we know that

The stated interest rate is a percentage which is calculated per year and refers to the return on the investment made.

The nominal interest rate is the rate received by the depositor before taking into account the inflation rate.

therefore

The nominal interest rate is equal to the stated interest rate and does not include the inflation rate.

so

Since the stated rate in this problem is 2.5%, the nominal rate of interest for this savings account is also 2.5%