{"id":90337,"date":"2025-06-01T10:26:36","date_gmt":"2025-06-01T10:26:36","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=90337"},"modified":"2025-06-01T10:26:36","modified_gmt":"2025-06-01T10:26:36","slug":"what-is-the-real-interest-rate-on-a-credit-card-loan-bearing-24-inter","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/what-is-the-real-interest-rate-on-a-credit-card-loan-bearing-24-inter\/","title":{"rendered":"What is the real interest rate on a Credit Card loan bearing 24% inter"},"content":{"rendered":"

What is the real interest rate on a Credit Card loan bearing 24% interest per year, if the rate of inflation is 10% ?<\/p>\n

[amp_mcq option1=”240%” option2=”34%” option3=”14%” option4=”4%” correct=”option3″]<\/p>\n

\n
\n
This question was previously asked in<\/div>\n
UPSC CAPF – 2019<\/div>\n<\/div>\n
Download PDF<\/a>Attempt Online<\/a><\/div>\n<\/div>\n
\nThe real interest rate is the nominal interest rate adjusted for the effects of inflation. The approximate relationship is given by the Fisher equation:
\nReal Interest Rate \u2248 Nominal Interest Rate – Inflation Rate
\nGiven:
\nNominal Interest Rate = 24%
\nInflation Rate = 10%
\nReal Interest Rate \u2248 24% – 10% = 14%
\n<\/section>\n
\n– The nominal interest rate is the stated interest rate without accounting for inflation.
\n– Inflation erodes the purchasing power of money over time.
\n– The real interest rate reflects the actual increase in purchasing power received by the lender (or paid by the borrower) after accounting for inflation.
\n<\/section>\n
\nThe exact formula for the real interest rate is (1 + nominal rate) = (1 + real rate) * (1 + inflation rate).
\n1 + Real Rate = (1 + Nominal Rate) \/ (1 + Inflation Rate)
\n1 + Real Rate = (1 + 0.24) \/ (1 + 0.10)
\n1 + Real Rate = 1.24 \/ 1.10
\n1 + Real Rate \u2248 1.12727
\nReal Rate \u2248 1.12727 – 1 = 0.12727 or 12.73%.
\nHowever, the approximate formula is commonly used, especially in multiple-choice questions where the options are spaced out, and it matches one of the options (14%) closely enough considering the approximation inherent in the question’s context.
\n<\/section>\n","protected":false},"excerpt":{"rendered":"

What is the real interest rate on a Credit Card loan bearing 24% interest per year, if the rate of inflation is 10% ? [amp_mcq option1=”240%” option2=”34%” option3=”14%” option4=”4%” correct=”option3″] This question was previously asked in UPSC CAPF – 2019 Download PDFAttempt Online The real interest rate is the nominal interest rate adjusted for the … <\/p>\n

Detailed SolutionWhat is the real interest rate on a Credit Card loan bearing 24% inter<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1085],"tags":[1119,1120,1190],"class_list":["post-90337","post","type-post","status-publish","format-standard","hentry","category-upsc-capf","tag-1119","tag-economic-development","tag-money-banking","no-featured-image-padding"],"yoast_head":"\nWhat is the real interest rate on a Credit Card loan bearing 24% inter<\/title>\n<meta name=\"description\" content=\"The real interest rate is the nominal interest rate adjusted for the effects of inflation. The approximate relationship is given by the Fisher equation: Real Interest Rate \u2248 Nominal Interest Rate - Inflation Rate Given: Nominal Interest Rate = 24% Inflation Rate = 10% Real Interest Rate \u2248 24% - 10% = 14% - The nominal interest rate is the stated interest rate without accounting for inflation. - Inflation erodes the purchasing power of money over time. - The real interest rate reflects the actual increase in purchasing power received by the lender (or paid by the borrower) after accounting for inflation.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/what-is-the-real-interest-rate-on-a-credit-card-loan-bearing-24-inter\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What is the real interest rate on a Credit Card loan bearing 24% inter\" \/>\n<meta property=\"og:description\" content=\"The real interest rate is the nominal interest rate adjusted for the effects of inflation. The approximate relationship is given by the Fisher equation: Real Interest Rate \u2248 Nominal Interest Rate - Inflation Rate Given: Nominal Interest Rate = 24% Inflation Rate = 10% Real Interest Rate \u2248 24% - 10% = 14% - The nominal interest rate is the stated interest rate without accounting for inflation. - Inflation erodes the purchasing power of money over time. - The real interest rate reflects the actual increase in purchasing power received by the lender (or paid by the borrower) after accounting for inflation.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/exam.pscnotes.com\/mcq\/what-is-the-real-interest-rate-on-a-credit-card-loan-bearing-24-inter\/\" \/>\n<meta property=\"og:site_name\" content=\"MCQ and Quiz for Exams\" \/>\n<meta property=\"article:published_time\" content=\"2025-06-01T10:26:36+00:00\" \/>\n<meta name=\"author\" content=\"rawan239\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"rawan239\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"1 minute\" \/>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"What is the real interest rate on a Credit Card loan bearing 24% inter","description":"The real interest rate is the nominal interest rate adjusted for the effects of inflation. 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