If the rate of inflation is 5 % , what nominal interest rate is necessary for you to earn a 2.4 % real interest rate on your investment? (Note: Be careful not to round any intermediate steps less than six decimal places.)

7.52%

Explanation:

Use fisher equation to solve this question. It is an equation that shows the relationship between nominal interest rate and real interest rate in consideration to inflation rate.

Fisher equation;

Nominal = [ (1 + Real rate) * (1+inflation) ] - 1

Nominal = [ (1+0.024) * (1+0.05) ] - 1

Nominal = (1.024 * 1.05) - 1

Nominal = 1.0752 - 1 = 0.0752 or 7.52%

Therefore, the nominal rate is 7.52%