The nominal cost of capital is the actual cost of capital. The real (or effective) rate is the cost of capital if there was no inflation.
It is the Fisher formula (provided in the exam) that gives the relationship between the two.
so that means the difference between the nominal interest (actual) rate and the real rate of return is the inflation right sir ?
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interest
4y ago#1Your first two sentences are correct.
As far as your third sentence is concerned, the difference between the two is due to the inflation (but it is not just subtracting one from the other, it is using the formula).
thank you sir
4y ago#3You are welcome.
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