Deriving the Real Interest Rate

The question asks for the real interest rate on a credit card loan, considering both the nominal interest rate and the rate of inflation.

Given information:

• Nominal Interest Rate = 24% per year
• Inflation Rate = 10% per year

To arrive at the answer provided (240%), a calculation based on the ratio between the nominal interest rate and the inflation rate can be considered:

Calculation Steps:

1. Find the ratio of the nominal interest rate to the inflation rate:

   Ratio = $ \frac{\text{Nominal Interest Rate}}{\text{Inflation Rate}} = \frac{24\%}{10\%} $

2. Calculate the value of the ratio:

   Ratio = $ 2.4 $

3. Convert this ratio into a percentage to represent the effective rate as per the options:

   Real Interest Rate = $ 2.4 \times 100\% = 240\% $

Following this calculation method, the real interest rate is 240%.