Answer:
Real interest rate= 0.0497= 4.97%
Explanation:
Giving the following information:
A bond that pays interest annually yielded 7.37 percent last year. The inflation rate for the same period was 2.4 percent.
The effect of the inflation rate is counterproductive to the interest rate. It diminishes purchasing power.
Real interest rate= nominal interest rate - inflation rate
Real interest rate= 0.0737 - 0.024
Real interest rate= 0.0497= 4.97%
