If investors are to earn a 2.4% real interest rate, what nominal interest rate must they earn if the inflation rate is: Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Answer is complete but not entirely correct. Nominal Interest Rate Inflation Rate a. Zero b. 3.4% c. 5.4% 2.40 % 5.80% 7.80 %

If investors are to earn a 2.4% real interest rate, what nominal interest rate must they earn if the inflation rate is: Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Answer is complete but not entirely correct. Nominal Interest Rate Inflation Rate a. Zero b. 3.4% c. 5.4% 2.40 % 5.80% 7.80 %

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

Problem 1PS

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Similar questions

Using the following information, determine the real rate of interest: Rate % inflation 0.53 T-bill 5.00 10y T-Bond 6.00 10y AAA Corporate 6.41 10y AA Corporate 7.52 note: your answer should be to 2 decimal places. So, if your answer is 3.253%, for example, then enter 3.25 without the percent sign.
The two-year interest rate is 11.2% and the expected annual inflation rate is 5.6%. a.What is the expected real interest rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) b-1. If the expected rate of inflation suddenly rises to 7.6%, what does Fisher’s theory say about how the real interest rate will change? multiple choice Real rate increases Real rate does not change Real rate decreases b-2. If the expected rate of inflation suddenly rises to 7.6%, what will be the new nominal rate? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
Suppose the real rate is 3.5 percent and the inflation rate is 2 percent. What rate would you expect to see on a Treasur bill? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g 32.16.)
If the rate of inflation is 5.9%, what nominal interest rate is necessary for you to earn a 2.6% real interest rate on your investment? (Note: Be careful not to round any intermediate steps less than six decimal places.) The nominal interest rate is ______ (Round to two decimal places.)
If the rate of inflation is 5.4%, what nominal interest rate is necessary for you to earn a 3% real interest rate on your investment?(Note: Be careful not to round any intermediate steps less than six decimal places.) The nominal interest rate is_______________ (Round to two decimal places.)
If the rate of inflation is 4.8%, what nominal interest rate is necessary for you to earn a 2.2% real interest rate on your investment? (Note: Be careful not to round any intermediate steps less than six decimal places.) The nominal interest rate is ____%. (Round to two decimal places.)
Treasury bills are currently paying 8 percent and the inflation rate is 3 percent. What is the approximate real rate of interest? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) What is the exact real rate? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
If Treasury bills are currently paying 3.05 percent and the inflation rate is 1.89 percent, what is the approximate real rate of interest? The exact real rate? Can the calculator and excel solution be provided?
Assume inflation is 2.60% and the nominal (annual) interest rate is 6.35%. If the interest rate is held constant, but inflation rises to 5.25%, does it cost more or less in real terms to borrow money than when the inflation rate was 2.60%? Explain your answer and make sure to include your real interest rates in both situation.
Assume that the real risk-free rate is 1% and that the maturity risk premium is zero. If a 1-year Treasury bond yield is 6% and a 2-year Treasury bond yields 7%, what is the 1-year interest rate that is expected for Year 2? Calculate this yield using a geometric average. Do not round intermediate calculations. Round your answer to two decimal places. What inflation rate is expected during Year 2? Do not round intermediate calculations. Round your answer to two decimal places.
Fixed Income Course - This is all one question. The following questions are about TIPS.a. What is meant by the “real rate”?b. What is meant by the “inflation-adjustedprincipal”?c. Suppose that the coupon rate for a TIPS is3%. Suppose further that an investor purchases$10,000 of par value (initial principal) of thisissue today and that the semiannual inflationrate is 1%.1. What is the dollar coupon interest thatwill be paid in cash at the end of the firstsix months?2. What is the inflation-adjusted principal atthe end of six months?
29. If investors are to earn a real interest rate at 4%, what nominal interest rate must they earn if the inflation rate is a. 0% (Round your answer to 2 decimal places.) b. 4% (Round your answer to 2 decimal places.) c. 6%(Round your answer to2 decimal places.)

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