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If the market interest rate is 12% per year when the inflation rate is 9% per...

If the market interest rate is 12% per year when the inflation rate is 9% per year, the real interest rate is closest to: Q24 If the inflation rate is 5% per year, how many years will it take for the cost of something to double when prices increase at exactly the same rate as inflation?

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Answer #1

Q.

If the market interest rate is 12% per year when the inflation rate is 9% per year, the real interest rate is:

Answer) 3%

Real interest rate = Market (nominal) interest rate minus Inflation

Therefore,

Real interest rate = 12 - 9 = 3%

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Q.24

If the inflation rate is 5% per year, how many years will it take for the cost of something to double when prices increase at exactly the same rate as inflation?

Time taken to double = 70 / interest rate

= 70 / 5

= 14 years

Answer) 14 years

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