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.)

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
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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.)

 

 

 

 

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