If nominal interest rate is 10% and inflation rate is 4% what is the real interest rate?

Real Interest Rate = Nominal Interest Rate - Inflation Rate

• Nominal Interest Rate = 10%
• Inflation Rate = 4%

Therefore, the real interest rate is:

Real Interest Rate = 10% - 4% = 6%

Nominal Interest Rate: This is the stated interest rate on a loan or investment. It's the rate you see advertised by banks and financial institutions.

Real Interest Rate: This is the nominal interest rate adjusted for inflation. It reflects the actual purchasing power of the interest earned or paid.

Formula: Real Interest Rate = Nominal Interest Rate - Inflation Rate

• Nominal Interest Rate = 10%
• Inflation Rate = 4%

Therefore, the real interest rate is:

Real Interest Rate = 10% - 4% = 6%