Assume the nominal interest rate is 12 percent and the expected rate of inflation is 8 percent. Calculate real rate of interest. Now assume instead that the nominal interest rate is 4 percent and the expected rate of inflation is minus 2 percent. Calculate the real rate of interest. Assume the expected rate of inflation is 6 percent per year. What nominal interest rate should you charge to receive a real interest rate of 2 percent per year
Assume the nominal interest rate is 12 percent and the expected rate of inflation is 8 percent. Calculate real rate of interest. Now assume instead that the nominal interest rate is 4 percent and the expected rate of inflation is minus 2 percent. Calculate the real rate of interest. Assume the expected rate of inflation is 6 percent per year. What nominal interest rate should you charge to receive a real interest rate of 2 percent per year
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 10P
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Assume the nominal interest rate is 12 percent and the expected rate of inflation is
8 percent. Calculate real rate of interest.
- Now assume instead that the nominal interest rate is 4 percent and the expected rate of
inflation is minus 2 percent. Calculate the real rate of interest.
- Assume the expected rate of inflation is 6 percent per year. What nominal interest rate
should you charge to receive a real interest rate of 2 percent per year?
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