Suppose Frankie is a consumer in the simple economy from questions 1 and 2. He has sent you an email with some account options that he's considering for saving his money. He knows the nominal interest rates for the accounts and
wants to make sure he understands what his real return will be, considering the inflation rate calculated from question 2.
Which phrase in Frankie's email incorrectly identifies the real rate of return?
Select the correct text in the passage.
Hey! I was wondering if you could look over these options for me. I'm looking at a savings account at Chapman
Bank with a nominal interest rate of 2%, so my real interest rate will be negative. Bank StarOne offers an
account with a stated interest rate of 3%, so my real return will be 5.22%. I'm also looking at a couple of options
at a credit union: one with a nominal rate of 3% (so the real rate is 0.78%) and one that states a rate of 4% (a
real rate of 1.78%).
What do you think of these? Let me know your thoughts.