Answer:
n=1.05-1=5%
Explanation:
The nominal interest rate for any project/investment is calculated using the following equation:
1+n=(1+i)(1+r)
Where
n= nominal interest rate= to be calculated
i=inflation rate=1.25% in the given question
r= real interest rate=3.75% in the given question
1+n=(1+i)(1+r)
1+n=(1+1.25%)(1+3.75%)
1+n=1.05
n=1.05-1=5%
