Inflation, nominal interest rates, and real

rates.

From 1991 to 2000, the U.S. economy had an annual inflation rate of around

%.

The historical annual nominal risk-free rate for this same period was around

%.

Using the approximate nominal interest rate equation and the true nominal interest rate equation, compute the real interest rate for that decade.

Question content area bottom

Part 1

What is the estimated real interest rate using the approximate nominal interest rate equation for that decade?