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If the interest rate on one year govt. bonds is 6.0% and the inflation rate is 2.0%, what is the real interest rate?

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter13: Long-term Liabilities

Section: Chapter Questions

Problem 5Q: What do you have to do to the interest rate and years of maturity if a bond pricing problem tells...

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Concept explainers

Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.

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If the interest rate on one year govt. bonds is 6.0%
and the inflation rate is 2.0%, what is the real
interest rate?

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