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Fisher Equation: Nominal, Real, and Inflation = 10%. Expected inflation is E(T) = Q1) You lend money to a business colleague at a rate of i 3.5%. What is your real rate of return r? Use the exact Fisher Equation. = Q2) How much would you charge a colleague on a loan of $100 if you want your real rate or return to be r = 6% and the expected inflation is E(л) = 4%. E.g., what is the nominal rate i? Use the exact Fisher Equation. Q3) A corporate bond pays investors both a fixed and variable rate of return. The fixed rate is constitutes the real return which is r = 4.5%. The variable rate is indexed to the CPI and is to compensate investors for inflation. If the expected inflation in the next year is E(T) = 2.5%, what is the nominal rate of return i the company will have to pay? Enter your answer in the table below in the cells colored in yellow. You must show all work to receive credit. Q1) r= |Q2) i= ||Q3) i= Answer

Fisher Equation: Nominal, Real, and Inflation = 10%. Expected inflation is E(T) = Q1) You lend money to a business colleague at a rate of i 3.5%. What is your real rate of return r? Use the exact Fisher Equation. = Q2) How much would you charge a colleague on a loan of $100 if you want your real rate or return to be r = 6% and the expected inflation is E(л) = 4%. E.g., what is the nominal rate i? Use the exact Fisher Equation. Q3) A corporate bond pays investors both a fixed and variable rate of return. The fixed rate is constitutes the real return which is r = 4.5%. The variable rate is indexed to the CPI and is to compensate investors for inflation. If the expected inflation in the next year is E(T) = 2.5%, what is the nominal rate of return i the company will have to pay? Enter your answer in the table below in the cells colored in yellow. You must show all work to receive credit. Q1) r= |Q2) i= ||Q3) i= Answer

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Fisher Equation: Nominal, Real, and Inflation = 10%. Expected inflation is E(T) = Q1) You lend money to a business colleague at a rate of i 3.5%. What is your real rate of return r? Use the exact Fisher Equation. = Q2) How much would you charge a colleague on a loan of $100 if you want your real rate or return to be r = 6% and the expected inflation is E(л) = 4%. E.g., what is the nominal rate i? Use the exact Fisher Equation. Q3) A corporate bond pays investors both a fixed and variable rate of return. The fixed rate is constitutes the real return which is r = 4.5%. The variable rate is indexed to the CPI and is to compensate investors for inflation. If the expected inflation in the next year is E(T) = 2.5%, what is the nominal rate of return i the company will have to pay? Enter your answer in the table below in the cells colored in yellow. You must show all work to receive credit. Q1) r= |Q2) i= ||Q3) i= Answer
Transcribed Image Text:Fisher Equation: Nominal, Real, and Inflation = 10%. Expected inflation is E(T) = Q1) You lend money to a business colleague at a rate of i 3.5%. What is your real rate of return r? Use the exact Fisher Equation. = Q2) How much would you charge a colleague on a loan of $100 if you want your real rate or return to be r = 6% and the expected inflation is E(л) = 4%. E.g., what is the nominal rate i? Use the exact Fisher Equation. Q3) A corporate bond pays investors both a fixed and variable rate of return. The fixed rate is constitutes the real return which is r = 4.5%. The variable rate is indexed to the CPI and is to compensate investors for inflation. If the expected inflation in the next year is E(T) = 2.5%, what is the nominal rate of return i the company will have to pay? Enter your answer in the table below in the cells colored in yellow. You must show all work to receive credit. Q1) r= |Q2) i= ||Q3) i= Answer
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