The real interest rate can be estimated by:

A) subtracting the pure interest rate from the nominal interest rate.
B) dividing the nominal interest rate by the consumer price index.
C) subtracting the nominal interest rate from the rate of inflation.
D) subtracting the rate of inflation from the nominal interest rate.

Real Interest Rate

The interest rate expressed in dollars of constant value (adjusted for inflation) and equal to the nominal interest rate less the expected rate of inflation.

Nominal Interest Rate

The nominal interest rate is the interest rate before adjustments for inflation, representing the face value of borrowed money.