Use the table below to correctly fill in the number to 2 decimal places.

Nominal and Real Interest Rates, May 2026

Country

Nominal Interest Rate (percent)

Inflation Rate (percent) Real Interest Rate (percent)
Neverland 22.4 23.7
Wonderland 1.3 2.5
Oz 1.0 5.4
Pandora 9.6 7.5

What is the real interest rate in Wonderland?

Question

Use the table below to correctly fill in the number to 2 decimal places.

Nominal and Real Interest Rates, May 2026

Country

Nominal Interest Rate (percent)

Inflation Rate (percent)	Real Interest Rate (percent)
Neverland	22.4	23.7	
Wonderland	1.3	2.5	
Oz	1.0	5.4	
Pandora	9.6	7.5

What is the real interest rate in Wonderland?

BlackTom AI · Accepted Answer

Real interest rate ≈ nominal interest rate − inflation rate (the Fisher approximation).

Relevant concepts: The real interest rate measures the change in purchasing power of savings after accounting for inflation. For small rates the Fisher approximation r ≈ i − π (where i is the nominal rate and π is the inflation rate) is normally used in tables like this.

Step-by-step calculation:
1. Nominal interest rate in Wonderland = 1.3%  
2. Inflation rate in Wonderland = 2.5%  
3. Apply the approximation: real rate = 1.3% − 2.5% = −1.2%

Intermediate arithmetic shown: 1.30 − 2.50 = −1.20 (percent). Formatting to two decimal places gives −1.20%.

Why this is correct: The inflation rate (2.5%) exceeds the nominal return (1.3%), so holders of the nominal asset lose purchasing power; the real interest rate is negative. The problem asks for the result to two decimal places, so −1.20% is the appropriate presentation.

Note on exact Fisher formula (optional check): the exact real rate is (1 + i)/(1 + π) − 1 = (1.013/1.025) − 1 ≈ −0.011707 ≈ −1.17%. This differs slightly from the approximation (−1.20%) but the table-style calculation uses the simple subtraction and the requested answer is −1.20%.

Common mistakes: reversing subtraction (π − i), adding rates, or failing to round to two decimals. These would give incorrect signs or values.

Conclusion: Using the standard approximation i − π and rounding to two decimals yields −1.20%, which matches the provided answer.

类似问题

If nominal interest = 2% and expected inflation = –10%, real interest is:

Nominal = 2%, expected inflation = –10%. Real interest is:

If the nominal interest rate is 2% and the expected inflation rate is -10%, the real interest rate is:

更多留学生实用工具

智能学习助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单