Question

What is the real interest rate for an account with a nominal interest rate of 1% when the rate of inflation is 2%?

Answer 1

-1

I clicked the answer and got it right

Answer 2

Real Interest Rate = -1%

Explanation:

Nominal Interest rate is the general market prevailing interest rate. Real Interest rate is nominal interest rate adjusted to price level change (inflation or deflation)

Real Interest Rate = Nominal Interest Rate - Inflation rate

1% - 2% = -1%