The interest rate before taking inflation into account. The nominal interest rate is the rate quoted in loan and deposit agreements. The equation that links nominal and real interest rates is:

(1 + nominal rate) = (1 + real interest rate) (1 + inflation rate).

It can be approximated as nominal rate = real interest rate + inflation rate.

a) Nominal rate = [(1.025)(1.03)] - 1 = 0.05575, or 5.575%

b) 5.575 + 2.0 = 7.575%

tnx raja, can you calculate them that i understand how it is done, thanks