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To calculate the real rate of interest, you can use the Fisher equation, which is expressed as:

\[
1 + r = \frac{1 + i}{1 + \pi}
\]

Where:
- \(r\) is the real rate of interest,
- \(i\) is the nominal interest rate (in this case, 9.5% or 0.095 as a decimal),
- \(\pi\) is the inflation rate (in this case, 3.7% or 0.037 as a decimal).

Rearranging the formula to solve for \(r\):

\[
r = \frac{1 + i}{1 + \pi} - 1
\]

Substitute the values:

\[
r = \frac{1 + 0.095}{1 + 0.037} - 1
\]

Now, let's compute this value:

\[
r = \frac{1.095}{1.037} - 1
\]

\[
r = 1.0559 - 1 = 0.0559
\]

Thus, the real rate of interest is approximately **0.0559** or **5.59%** when expressed as a percentage.

Would you like any further details or clarifications? Here are some related questions for deeper understanding:

1. How does inflation affect the real rate of return?
2. What are the implications of a high inflation rate on investments?
3. How would the calculation change if the inflation rate was 5%?
4. What is the relationship between nominal interest rates and real interest rates over time?
5. How do central banks use interest rates to control inflation?

**Tip:** Always convert percentages to decimal form before performing financial calculations to avoid errors.

If the nominal rate of interest is 9.5% and expected inflation is 3.7%, what is the real rate of interest? Enter your answer as a decimal and show four decimal places.

Learn how to calculate the real rate of interest using the Fisher Equation. Given a nominal interest rate of 9.5% and an inflation rate of 3.7%, this step-by-step solution will guide you to find the real interest rate, suitable for finance or economics students.

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