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22 August, 20:51

The outstanding bonds of Winter Time Products provide a real rate of return of 3.00 percent. The current rate of inflation is 2.00 percent. What is the nominal rate of return on these bonds

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  1. 22 August, 21:14
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    The nominal rate of return on these bonds is 5%

    Explanation:

    The Formula for the Real Rate of Return is

    Real rate of return = Nominal interest rate - Inflation rate

    So,

    Nominal interest rate=Real rate of return+Inflation rate

    Nominal interest rate=3%+2%

    Nominal interest rate=5%
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