Answer: 0.35%
Step-by-step explanation:
Given the following :
Advertised interest rate = nominal rate = 1.5%
Inflation rate = 1.15%
The real rate of return is calculated by:
[(1 + nominal rate) / ( 1 + inflation rate)] - 1
[(1 + (1.5/100)) / (1 + (1.15/100))] - 1
[(1 + 0.015) / ( 1 + 0.0115)] - 1
[ 1.015 / 1.0115] - 1
1.0034602 - 1 = 0.0034602
Real rate of return = (0.0034602 * 100)%
Real rate of return = 0.346%
