Homework Help: Economics

Posted by Seinna on Thursday, May 17, 2012 at 5:43pm.

The formula given was: (real rate of interest) = (nominal rate of interest) - (expected rate of inflation)

A chartered bank offers a one-year loan at "3 points above prime." Prime is 4 per cent.

a) What is the nominal interest rate?
b)If expected inflation is 3 per cent for next year, what is the real rate of interest?
c) Suppose inflation rises to 4 per cent. What is the real rate of interest?

Can you show me how to do this with all steps included? Pleasee.

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