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Assume you desire a real rate of return of 4 percent on an investment and you expect the annual average inflation rate to be 3.2

Assume you desire a real rate of return of 4 percent on an investment and you expect the annual average inflation rate to be 3.2 percent. What should the nominal interest rate be on this investment?

1.

8 percent

2.

3.0 percent

3.

30 percent

4.

7.2 percent

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