Dean borrows $400 from Tim.  Tim wants to make a 7% real return on his money, so they both agree on a 7% stated interest rate paid next year. Dean and Tim did not anticipate any inflation, yet the actual inflation turned out to be 2% next year. In this case, what is Tim’s real rate of return?

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A: Real interest rate can be calculated by using the following formula.

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A: Hey, Thank you for the question. According to our policy, we can only answer 1 question per session.…

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Q: consumer price index

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Q: rate of​ inflation

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