Distinguish between the nominal and real rates of interest using an example

What will be an ideal response?

The nominal rate of interest is the stated rate of interest, while the real rate of interest is expressed in constant dollars or dollars adjusted for inflation. The real interest rate is the nominal interest rate minus the rate of inflation. In simple terms, if the nominal rate of interest charge on a loan is 7%, but the inflation rate is 3%, then the real rate of interest received by the institution making the loan is 4%.