Suppose the real rate is 2.8 percent and the inflation rate is 4.4 percent. What...

Suppose the real rate is 2.8 percent and the inflation rate is 4.4 percent.

What rate would you expect to see on a Treasury bill? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Expert Solution

Nominal rate would be expected on trasury bills.

Nominal rate = [{1 + Real interest rate} x {1+ Inflation rate}] - 1

= [ 1.028 x 1.044 ] - 1

= 7.32

jeff jeffy answered 2 years ago

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