a) 5%

b) 6%

c)7%

d) 11%

correct answer is: a) 5%

**Explanation**

Here,

Inflation rate is 3 %

and Nominal rate is 8 %

We know,

Real interest rate = (Nominal interest rate – Inflation rate)

\therefore Real interest rate =\left(8\%\;-\;3\%\right)

=\ 5 %**Ans:** If the inflation rate is at 3% and the nominal interest rate is at 8%, then the real rate of interest is 5%.

**This particular question can also be asked in the following way:****1. How to calculate the real rate of interest when the inflation rate is 3% and the nominal interest rate is 8%?****2. What is the formula to find the real rate of interest given the inflation rate of 3% and the nominal interest rate of 8%?****3. Determine the real rate of interest with an inflation rate of 3% and a nominal interest rate of 8%.****4. Calculate the difference between the nominal interest rate and inflation rate to find the real rate of interest.****5. What is the actual purchasing power gain or loss when the nominal interest rate is 8% and the inflation rate is 3%?**