Sally has a credit card balance of $3,000. The credit card charges a nominal interest rate of 15 percent a year on unpaid balances. The inflation rate is 3 percent a year.
a. Calculate the real interest rate that Sally pays the credit card company.
b. If the inflation rate falls to 2 percent a year and the credit card company keeps the nominal interest rate at 15 percent a year, calculate the real interest rate that Sally pays.