<-- Real %Given a nominal interest rate of 6.2%
and a real interest rate of 3.5%
Calculate the inflation rate:
Show relation of (n), (r), and (i)
1 + n = (1 + i)(1 + r)
Divide each side by (1 + r):
| 1 + n | |
| 1 + r |
| (1 + i)(1 + r) |
| 1 + r |
Solving for i, we get:
| 1 + i = | 1 + n |
| 1 + r |
| 1 + i = | 1 + 0.062 |
| 1 + 0.035 |
| 1 + i = | 1.062 |
| 1.035 |
1 + i = 1.0260869565217
i = 1.0260869565217 - 1
i = 0.026086956521739
Convert Inflation Rate to a %
Inflation Percent = 0.026086956521739 * 100%
Inflation Percent = 2.6086956521739
Final Answer
Inflation Rate = 2.609%
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