Real Versus Nominal Discount Rates by Myhomeworkhelp.com is Here for Help
Nominal discount rate is that rate of interest which is levied on the principle lent by the payee. However, the real discount rate is that rate of interest which calculates the difference between the nominal rate of interest and that of the then inflation rate. The real rate varies from year to year whereas the nominal rate remains fixed. The common people are always blindsided by showing them just the calculations of the nominal rate of interests. However, the real rate of interests is always there in the background emptying their pockets.
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Nominal rates are obviously simpler and way better than real rates of interests are. But the fact is that real rates of interests are extremely important too. Without calculating how the inflation affects your principle, the calculation will always remain incomplete. The real rate of interest unlike the nominal rate of interest is not always positive. Since the inflation rate is subtracted from the nominal rate to get the real rate of interest, its value varies from time to time.
Why know the difference between the rates?
You must know the difference between the nominal rate of interest and the real rate of interest because it is the rate of interest that will be levied on your money. The real rate again is capable of being negative too. If the inflation rate tends to be higher than the nominal rate, the real rate of interest or discount is seemingly negative. To know more about how it works, you can always seek real versus nominal discount rates assignment help.
Problems students face
Since the real and nominal rates are such an important aspect of Microeconomics, you must make sure you do every bit thoroughly. For this to happen, you can always come to us for real versus nominal discount rates homework help when in doubt.
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