If the desired real rate of interest is 5 percent and the expected rate of inflation is 15 percent, what is the nominal rate of interest?

A) 5 percent
B) 10 percent
C) 15 percent
D) 20 percent

Nominal Interest Rate

The interest rate before adjustments for inflation; the stated or face interest rate on a loan or investment.

Real Rate of Interest

Real Rate of Interest is the interest rate that has been adjusted to remove the effects of inflation, providing a more accurate measure of the cost of borrowing.

Rate of Inflation

This refers to the annual percentage increase in the general price level of goods and services in an economy over a period of time.