What is the real interest rate given a nominal rate of 7.5​% and an inflation rate of 4.1​%?

To find the real interest rate, we can use the Fisher equation, which adjusts the nominal interest rate for inflation:

\[
\text{Real Interest Rate} = \frac{(1 + \text{Nominal Rate})}{(1 + \text{Inflation Rate})} - 1
\]

Given:
- Nominal rate = 7.5% or 0.075
- Inflation rate = 4.1% or 0.041

Substituting these values into the formula:

\[
\text{Real Interest Rate} = \frac{(1 + 0.075)}{(1 + 0.041)} - 1
\]

Calculating this:

\[
\text{Real Interest Rate} = \frac{1.075}{1.041} - 1 \approx 0.0326 \text{ or } 3.26\%
\]

### Answer:
The real interest rate is approximately **3.26%**.

Would you like further details or have any questions?

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1. How does the real interest rate impact savings and investments?
2. How would a change in inflation affect the real interest rate?
3. What is the Fisher equation and its applications in finance?
4. How does a high nominal interest rate with low inflation compare in real returns?
5. How does compounding affect the calculation of real interest?

**Tip:** Real interest rates provide a clearer picture of purchasing power changes over time, essential for long-term financial planning.

What is the real interest rate given a nominal rate of 7.5% and an inflation rate of 4.1%?

Understand how to calculate the real interest rate given a nominal interest rate of 7.5% and an inflation rate of 4.1%. Using the Fisher equation, this guide shows a step-by-step solution resulting in a real interest rate of approximately 3.26%, ideal for college-level finance students.

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