If nominal rate is 26% and inflation rate is 12%, then real rate can be
A. 13.75%
B. 11.65%
C. 12.50%
D. 13.50%
Answer: Option C
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Real rate can be 14% as Real rate is equal to (nominal rate-inflation rate)
real interest rate ≈ nominal interest rate − inflation rate. To find the real interest rate, we take the nominal interest rate and subtract the inflation rate. In this question nominal interest rate is 26 percent and the inflation rate is 12 percent, then the real return on that loan is 14 percent. But no such option is given in this question.