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.